Merrimack, N.H. -- PC Connection, a direct marketer of computer systems and peripherals, is buying ailing electronics e-tailer Cyberian Outpost in a stock-for-stock transaction slated for the third quarter.
Terms of the stock swap will be based on Cyberian's sales over the next three months and the average price of PC Connection shares over a 10-day period ending four days prior to the closing.
In the meantime, PC Connection will immediately provide Cyberian with two lines of credit worth upwards of $8 million and secured by Cyberian assets to keep the e-tailer afloat. PC Connection has also received an option to acquire as much as 20 percent of Cyberian for 51 cents a share.
Under terms of the deal, Cyberian, a pioneer in CE e-commerce, would continue to operate under its own brand from its current facilities, with president/CEO Darryl Peck staying on and reporting to PC Connection executive VP Robert Wilkins.
"Having a multi-brand, multi-channel strategy is key to our ongoing growth," Wilkins said. Added Peck: "This merger will enable us to more successfully compete in the consumer technology market."
Despite a 105 percent gain in revenues last year according to the 2001 TWICE Retail Registry, Cyberian has been beset by earnings woes that forced it to cut it workforce by 30 percent last month and which led to the recent departures of its former chief executive and CFO. The six-year-old seller of computer hardware, software, and assorted consumer electronics and accessories also operates the e-commerce sites of retailers Wolf Camera and Brookstone, and maintains an online joint venture with Tweeter Home Entertainment Group, which sells high-end CE through a branded department within outpost.com.
Although it has yet to meet with PC Connection, Tweeter anticipates that its relationship with Cyberian to continue. Said Tweeter senior VP Shelley Miller, "We expect our e-commerce efforts to continue without interruption and over time strengthen, because PC Connection is a solidly profitable, well capitalized organization."
Indeed, PC Connection, which ranked 14th on TWICE's Retail Registry, enjoyed sales of $1.45 billion last year, which it gleaned through its catalog, web and telemarketing channels. Cyberian, which ranked 40th on the TWICE Registry, reported net revenue of $355 million for the fiscal year ended February 28, 2001.