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GameStop buy Electronics Boutique


Bradcore
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sourceNEW YORK (MarketWatch) -- GameStop Corp. said Monday it agreed to acquire rival video game retailer Electronics Boutique Holdings Corp. for $1.44 billion to boost its international presence and bulk up to stave off competition from Wal-Mart.

 

 

 

GameStop (GME: news, chart, profile) , based in Grapevine, Texas, will pay $38.15 in cash and exchange 0.78795 of its shares for each share of Electronics Boutique (ELBO: news, chart, profile) . The deal values West Chester, Pa.-based Electronics Boutique at $55.18 a share.

 

Shares in Electronics Boutique leaped 34%, or $14.12, to close at $55.21, and GameStop rose $2.10, or 9.7%, to $23.71.

 

GameStop is looking to solidify its retail position among video game enthusiasts who usually don't purchase titles from Wal-Mart Stores Inc. (WMT: news, chart, profile) , which has emerged as the top seller of video games.

 

"We estimate that a combined retail presence will have market share in the low-20% range, which would make it the number two video game retailer behind Wal-Mart." wrote UBS analyst Michael Wallace in a note to investors.

 

GameStop, which had revenue of $1.84 billion for the fiscal year ended in January, operates more than 1,500 stores in the U.S, Puerto Rico, Ireland and Guam. Adding Electronics Boutique, which had annual sales of $1.99 billion over the same period, gives the firm 1,500 stores in the U.S., Europe, Asia and other overseas markets.

 

GameStop expects the acquisition to begin adding to earnings in the second half of 2005.

 

"Strategically, we think this is a great deal," wrote Wallace, who rates GameStop shares a buy.

 

The combined company, to be named GameStop Corp., will generate annual revenues of approximately $3.8 billion, with over 3,200 stores located in the United States, as well as nearly 600 international stores, wrote Michael Pachter, analyst for Wedbush Morgan Securities, in a note to investors.

 

Expanding market

 

Last month, Sony Corp. (SNE: news, chart, profile) expanded the game enthusiast market with the launch of its new Playstation Portable (PSP) handheld console, which saw 500,000 units sell in its first two days on the North American retail markets.

 

Video game sales rose 32% in March from the same period a year ago, according to data from the NPD Group. Fueling the surge was the March 24 launch of PSP, as well as the release of several new games such as "Fight Night Round 2" from Electronic Arts Inc. (ERTS: news, chart, profile) and "Splinter Cell: Chaos Theory" from Ubisoft Entertainment.

 

March hardware sales increased 56%, with the PSP comprising 32% of all hardware units sold.

 

Game retailers also will benefit from the forthcoming releases of next-generation console hardware from Sony and Microsoft (MSFT: news, chart, profile) . Both companies have not set release dates for their hardware but are largely expected to roll them out around the end of 2005.

 

"We project that Electronics Boutique will benefit from the early innings of the Xbox 2 platform launch, as 8 million U.S. 'hard-core' gamers will flock to specialty retailers for game purchases," wrote Piper Jaffray analyst Anthony Gikas in a March 28 note to investors. "Wal-Mart is not the destination for enthusiasts."

 

Gikas upgraded both Gamestop and Electronics Boutique to "outperform" from "market perform" on March 28.

 

Pachter expects the acquisition will boost the combined company's earnings per share by approximately 20 cents a share.

 

"Given that Electronics Boutique and Gamestop have traded at 15-to-16 times forward earnings over the last few weeks, we believe that an increase in Gamestop shares of approximately $2 to $3 share is likely," wrote Pachter in a note to clients.

 

Gamestop Chairman and Chief Executive Richard Fontaine and its Chief Operating Officer, Daniel DeMatteo, are expected to retain their current positions.

 

The boards of directors of each company have approved the deal, which is subject to approval by shareholders and antitrust regulators.

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Guest Fritz

I work at gamestop.

 

 

Eb has sitty Customer Service.

748785[/snapback]

Which is the one you work at cause the one in Kendall town and country sucks, and so does the one on miller and 93rd ave.

750246[/snapback]

Ice Man lives in Orlando.

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We have a Gamestop in one section of the mall, and an EB Games in the other...Our mall is in the shape of a cross, with one on the right section, and one on the top section

754973[/snapback]

 

Which mall is that UMFan?

 

I have the exact same mall in my area.

758567[/snapback]

Governers Square Mall in Tallahassee...

 

I don't think anyone else on the board lives here except that one guy... :plain

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