Tweeter Home Entertainment To Acquire Dow Stereo/Video

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The rapidly expanding Tweeter Home Entertainment Group, which made its first westward expansion move from its East Coast base last February when it acquired the Houston-based Home Entertainment retail chain, plans to extend its reach from coast-to-coast with the acquisition of privately-held Dow Stereo/Video of San Diego.

Tweeter has agreed to acquire Dow for $5.5 million in cash and stock, and is looking to close the transaction on June 30.

Dow, like Tweeter, is an upscale retailer, and is known as a national launching pad for new consumer electronics products and technologies. Also, like Tweeter, Dow is a member of the Pro Buying Group.

The merger announcement says the nine-store Dow chain had sales last year of $38 million. Tweeter's 1998 sales were $232.3 million. The addition of Dow and Home Entertainment boosts Tweeter's revenue to just under $300 million, which would lift it from 46th place on the TWICE Registry of leading consumer electronics retailers, to 36th, placing it just behind Fred Meyer Stores and just ahead of P.C. Richard & Son. The merger with Dow also will increase Tweeter's store count to 70.

In addition to Home Entertainment, New England's Tweeter, which floated its initial public offering just last July, also owns the Philadelphia-area Bryn Mawr Stereo chain and Atlanta's Hi-Fi Buys.

In an exclusive interview with TWICE, Dow president Mike Romagnolo said the decision to merge with Tweeter stemmed from the needed to finance expansion. "As a private company we can only take it just so far," and explored other alternatives, including going public or bringing in new investors. And in either of those cases the impact on the company is uncertain.

With Tweeter "we have a perfect fit," Romagnolo said. "They will come in and treat our employees as I have," and on a personality level, they are not strangers.

As for management, Romagnolo said he planned on staying on board at least through the end of this year. Dow's well known spokesperson and director, Tom Campbell, said he too would remain at least through an unspecified transition period, and will continue his involvement with the Congressional Internet Caucus, the Washington think-tank Icon Solutions and as a board member of KFX Energy.

Tweeter president Jeff Stone said a quick expansion of Dow is already planned, and locations are being sought for two outlets in Southern California that should be operating by Christmas. Others will follow. "There are plenty of places (in the state) to expand the Dow Stereo name over the next several years."

Dow, said Stone, has done "a great job with the media and built a great customer awareness. We look to capitalize on what they have done." He said the Dow product mix will be "moved more upscale so it looks a little bit more like the rest of our business. We have a strong customer base in San Diego, so we don't have to spend 15% of sales, as we do in some markets, to get the name known."

The Dow buy will put a temporary halt to Tweeter's acquisition binge, Stone told us. Having stores in five national regions "gives us a lot of room to add new stores, and we are planning to add 20, and relocate seven, in the next few months." So, he concluded, "I think we will keep the rumor mill quite for a while."


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