Richmond, Va. — Circuit City Stores has signed a definitive agreement to buy InterTan, a Canadian consumer electronics retailer of private-label and internationally branded products, for a cash tender offer of $14 per share of InterTan common stock totaling about $284 million.
If the tender is successful, the Barre, Ontario-based InterTan will merge with Circuit City, probably in the second quarter. Circuit City said the purchase will show up in its earnings for the current fiscal year.
Following completion of the deal, InterTan will become a subsidiary of Circuit City retaining its current management. InterTan, a publicly held company, did $400 million in sales this past fiscal year.
InterTan operates more than 980 company stores and some 300 dealer outlets in Canada, which operate under the trade names RadioShack, Rogers Plus and Battery Plus. InterTan licenses the RadioShack name in Canada. Seven years ago, RadioShack spun off and divested its ownership interest in InterTan.
In an analyst conference call today, Circuit City chairman, president/CEO Alan McCollough said there wold be some overlap of products between the two companies, but InterTan carried some product that Circuit City does not — accessories and gift "gadgets," namely high-tech fun items.
"They will benefit from the leverage of our scale and we from their [purchasing] experience," said McCollough. "They offer a large amount of cool stuff not in our stores."
Circuit City pinpoints gross margin at InterTan at 40 percent, with operating margin of close to 5 percent. About 9.5 percent of the InterTan inventory purchases in its most recent fiscal year included the RadioShack brand.
McCollough emphasized the synergies the two companies bring to the merger table, whereby InterTan offers higher margin private-label products and strategic sourcing advantages and Circuit City the element of scale. This would be the first time Circuit would have a presence in the Canadian market.
"They would bring unique product assortments to out stores, new products that don’t now exist," said McCollough. They run a good business, and the same folks will [continue to] run the business."
In a second announcement today, Circuit City said it has signed a definitive agreement to purchase the assets of MusicNow, a digital music platform that provides an online music store.
MusicNow will retain its own brand and continue to empower third parties to launch digital music services. The deal, which is not expected to have a material impact on Circuit City’s current fiscal-year earnings, should close in April.