By Ben Berkowitz
LOS ANGELES (Reuters) - GameStop Corp. (NYSE:GME - news) on Monday said it would buy rival Electronics Boutique Holdings Corp. (Nasdaq:ELBO - news) for $1.44 billion in cash and stock, likely creating the leading video game retailer in the United States.
Electronics Boutique stock jumped 29 percent, while GameStop shares fell 1.6 percent in early trading.
The combined entity would have more than 3,200 stores in the U.S. and 600 stores internationally, with annual revenues of nearly $4 billion and a dominant position in the growing market for used game sales.
"Nice deal, probably OK with the (Federal Trade Commission)," said Michael Pachter, an analyst with Wedbush Morgan Securities. "It would make them bigger than Wal-Mart," (NYSE:WMT - news) in terms of sales
The video game industry is preparing for a rocky transition as it moves from one generation of game console to a newer, more advanced generation of machine. That changeover is expected over the next 18 months, and such changes have historically led to fluctuating sales.
Analysts said the combined GameStop would be the biggest retailer of video games in the U.S, with a market share of about 25 percent. For the 2005 fiscal year, Electronics Boutique had annual sales of $1.98 billion, while GameStop sales totaled $1.84 billion.
Shareholders of Electronics Boutique would receive $38.15 in cash and the equivalent of 0.78795 shares of GameStop Class A common stock for each Electronics Boutique share, the companies said. That is a premium of 34.2 percent, based on Friday's closing prices for the stocks.
GameStop expects the deal to add significantly to its diluted earnings per share in the second half of fiscal year 2005 and in 2006. It expects "meaningful" pretax savings, beginning in fiscal year 2006.
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Topic: GameStop to Buy Electronics Boutique (Read 2681 times)