Maybe you’re thinking Best Buy Co. Inc. (NYSE: BBY) and Napster Inc. (Nasdaq: NAPS) were dominating giants in their respective industries. Now the two companies have announced they will merge into a mega-media company through a definitive agreement worth approximately $121 million.
Napster recently launched one of the world’s largest MP3 stores and posted fiscal 2008 revenue of $127.5 million, up 15 percent from the year prior; a loss of $16.5 million, as compared to a loss of $36.8 million the prior fiscal year; and positive cash flow for the fiscal year ended March 31, 2008.
Unanimously approved by Napster’s board of directors, the acquisition will include around 700,000 of Napster’s digital entertainment subscribers, its Web-based customer service platform, and its mobile capabilities.
“This transaction offers Best Buy a recognized platform for enhancing our capabilities in the digital media space and building new, recurring relationships with customers,” Brian Dunn, president and COO of Best Buy stated in the press release. “Over time we hope to strengthen our offerings to consumers, who we believe will increasingly seek devices and solutions that enable them to access their content wherever, whenever and however they want.”
Los Angeles-based Napster has approximately 140 employees. Best Buy does not plan to move Napster’s headquarters or make significant changes in personnel. Napster CEO Crhis Gorog and key members of the company’s senior management have secured employment positions in the new deal.
Best Buy said it thinks the capabilities of both companies will allow for the emergence of a company with the ability to build stronger relationships with customers, expand the number of subscribers, and generate recurring revenue.
“We believe Napster brings us excellent capabilities in the mobility space, as well as international operations and an established team of technology experts,” Dave Morrish, executive vice president of Connected Digital Solutions of Best Buy stated. “We can foresee Napster acting as a platform for accelerating our growth in the emerging industry of digital entertainment, beyond music subscriptions. We’re very excited to add these capabilities to leverage our existing relationships with the labels, the studios, and the hardware providers. We believe Napster will be an outstanding addition to our already robust portfolio of partners and offerings in the digital music space.”
Subject to regulatory conditions, the deal is expected to be finalized during the fourth quarter.
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