Dallas - CompUSA is buying out Good Guys in a cash-for-stock deal valued at over $55 million.
The definitive agreement, announced this morning, 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.
'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 — and 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 per share of Good Guys outstanding common stock, and has already invested $5 million in the chain via a two-year unsecured subordinated convertible promissory note, convertible into Good Guys common stock at the rate of $2.05 per share. Over the past year, shares of Good Guys have traded between $1 and $2, closing last week 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 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.
CompUSA, which ranked 7th on TWICE’s Top 100 CE Retailers chart, 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 on the Top 100, operates 71 stores in California, Nevada, Oregon and Washington, and had sales of $750 million in fiscal 2003.