MUMBAI: Best Buy Co., Inc. and Napster Inc. have entered into a definitive merger agreement for Best Buy to commence a tender offer for all outstanding Napster shares at a price of $2.65 per share in cash.
The transaction, with an aggregate purchase price of approximately $121 million (or $54 million net of approximately $67 million in cash and short term investments of Napster as of 30 June), is subject to customary closing conditions, including the tender of a number of Napster shares that constitutes a majority of Napster’s outstanding shares of common stock (on a fully-diluted basis).
The transaction is expected to close during the fourth calendar quarter. The transaction has been unanimously approved by the board of directors of Napster, and Napster’s directors and executive officers have agreed, in their capacities as stockholders, to tender their Napster shares and otherwise support the transaction.
The proposed acquisition includes Napster’s approximately 700,000 digital entertainment subscribers, its web-based customer service platform, and innovative mobile capabilities. In conjunction with the definitive merger agreement, Napster CEO Chris Gorog and key members of senior management of Napster have entered into employment agreements, effective at closing, pursuant to which they have agreed to continue as the Napster leadership post-acquisition.
Best Buy believes that Napster has one of the most comprehensive and easy-to-use music offerings in the industry, including streaming music, music subscriptions and the ability to purchase individual tracks, albums and mobile offers. Napster has approximately 140 employees, with its headquarters in Los Angeles. At this time, Best Buy does not plan to relocate Napster’s headquarters or to make significant changes in personnel.
"This transaction offers Best Buy a recognized platform for enhancing our capabilities in the digital media space and building new, recurring relationships with customers. 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," said Best Buy president and COO Brian Dunn.
Best Buy intends to use Napster’s capabilities and digital subscriber base to reach new customers with an enhanced experience for exploring and selecting music and other digital entertainment products over an increasing array of devices. Best Buy believes the combined capabilities of the two companies will allow it to build stronger relationships with customers, expand the number of subscribers, and capture recurring revenue by offering ongoing value over a mobile digital platform.
"We believe Best Buy will be an ideal partner for Napster and are very excited by the benefits that this transaction delivers to our shareholders, partners and employees. Best Buy is uniquely positioned to benefit from Napster’s digital entertainment distribution platform. We are looking forward to combining our digital media capabilities with Best Buy’s resources and global network to extend our digital content platforms," said Gorog.
Napster, which recently launched one of the world’s largest MP3 stores, had fiscal 2008 revenue of $127.5 million, an increase of 15 per cent over the prior fiscal year; a loss of $16.5 million, an improvement compared with a loss of $36.8 million the prior fiscal year; and positive cash flow for the fiscal year ended 31 March, 2008.
Best Buy intends to complete the acquisition using available cash.