CompUSA To Buy Good Guys For $55M

DALLAS— CompUSA is buying out Good Guys in a cash-for-stock deal valued at $55 million.

The definitive agreement is expected to close this February pending regulatory and Good Guys shareholder approval. At that time, Good Guys will become a wholly owned subsidiary of CompUSA and will continue to operate under the Good Guys name.

The move advances CompUSA's strategic expansion beyond PCs into consumer electronics and home networking, while providing Good Guys, which continues to suffer declining sales, earnings and traffic, with a much-needed capital infusion. (See financial report on p. 4.)

"This deal dovetails perfectly with our long-term technology convergence strategy," said CompUSA CEO Hal Compton, who called the acquisition "an exciting piece to our long-term growth game plan." He noted that CompUSA is "currently expanding our merchandise mix to include the latest entertainment technology" — including two prototype "Digital Living Experience" in-store vignettes. He described Good Guys' product niche as "highly complementary to our own."

Good Guys chairman/CEO Ken Weller said that the "impact of the economic environment on our industry" — particularly within the chain's core Northern California trading area — along with its need for additional capital to meet its longer-term objectives, were key drivers of the sale. The acquisition will also allow Good Guys stockholders to receive a "substantial premium" for their shares, he said.

Under terms of the deal, CompUSA will pay $2.05 for each share of Good Guys' outstanding common stock, in addition to $5 million previously invested in the chain through a two-year convertible note. Over the past year, shares of Good Guys have traded between $1 and $2, closing the week prior to the announcement at $1.50.

CompUSA will fund the acquisition with cash from parent company U.S. Commercial. Both are held by Mexican billionaire Carlos Slim Helu and his Mexico City-based company Grupo Carso, which made an unsuccessful $1.5 billion buyout bid for Circuit City this past summer. The Slim family continues to hold a 9.2 percent stake in the No. 2 CE chain.

In a research note, Lehman Brothers retail analyst Alan Rifkin said that the merger is characteristic of a highly fragmented and consolidating industry, and reflects the "ongoing difficulties suffered by smaller operators in the space."

CompUSA ranked 7th on TWICE's Top 100 CE Retailers report currently operates 226 superstores and an 80,000-SKU e-tail operation. It sold $3.9 billion in CE products last year. Good Guys, which ranked 23rd in the Top 100, operates 71 stores in California, Nevada, Oregon and Washington, and had sales of $750 million in fiscal 2003.