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MINNEAPOLIS & LOS ANGELES--September
15 2008 -Best Buy Co., Inc. (NYSE: BBY) and Napster Inc.
(NASDAQ: NAPS) announced today that the two companies have
entered into a definitive merger agreement for Best Buy to
commence a tender offer for all outstanding Napster shares at a
price of $2.65 per share in cash. The transaction, with an
aggregate purchase price of approximately $121 million (or $54
million net of approximately $67 million in cash and short term
investments of Napster as of June 30, 2008), is subject to
customary closing conditions, including the tender of a number
of Napster shares that constitutes a majority of Napster’s
outstanding shares of common stock (on a fully-diluted basis).
The transaction is expected to close during the fourth calendar
quarter. The transaction has been unanimously approved by the
board of directors of Napster, and Napster’s directors and
executive officers have agreed, in their capacities as
stockholders, to tender their Napster shares and otherwise
support the transaction.
The proposed acquisition includes
Napster’s approximately 700,000 digital entertainment
subscribers, its Web-based customer service platform, and
innovative mobile capabilities. In conjunction with the
definitive merger agreement, Napster CEO Chris Gorog and key
members of senior management of Napster have entered into
employment agreements, effective at closing, pursuant to which
they have agreed to continue as the Napster leadership
post-acquisition.
Best Buy believes that Napster has
one of the most comprehensive and easy-to-use music offerings in
the industry, including streaming music, music subscriptions,
the ability to purchase individual tracks, albums and mobile
offers. Napster has approximately 140 employees, with its
headquarters in Los Angeles. At this time, Best Buy does not
plan to relocate Napster’s headquarters or to make significant
changes in personnel.
“This transaction offers Best Buy a
recognized platform for enhancing our capabilities in the
digital media space and building new, recurring relationships
with customers,” said Brian Dunn, President and COO of Best Buy.
“Over time we hope to strengthen our offerings to consumers, who
we believe will increasingly seek devices and solutions that
enable them to access their content wherever, whenever and
however they want.”
Best Buy intends to use Napster’s
capabilities and digital subscriber base to reach new customers
with an enhanced experience for exploring and selecting music
and other digital entertainment products over an increasing
array of devices. Best Buy believes the combined capabilities of
the two companies will allow it to build stronger relationships
with customers, expand the number of subscribers, and capture
recurring revenue by offering ongoing value over a mobile
digital platform.
“We believe Napster brings us
excellent capabilities in the mobility space, as well as
international operations and an established team of technology
experts,” said Dave Morrish, Executive Vice President –
Connected Digital Solutions of Best Buy. “We can foresee Napster
acting as a platform for accelerating our growth in the emerging
industry of digital entertainment, beyond music subscriptions.
We’re very excited to add these capabilities to leverage our
existing relationships with the labels, the studios, and the
hardware providers. We believe Napster will be an outstanding
addition to our already robust portfolio of partners and
offerings in the digital music space.”
“We believe Best Buy will be an
ideal partner for Napster and are very excited by the benefits
that this transaction delivers to our shareholders, partners and
employees. Best Buy is uniquely positioned to benefit from
Napster’s digital entertainment distribution platform. We are
looking forward to combining our digital media capabilities with
Best Buy’s resources and global network to extend our digital
content platforms,” said Chris Gorog, chairman and CEO of
Napster.
Under the terms of the definitive
merger agreement, Best Buy will commence a cash tender offer to
purchase all of the outstanding shares of Napster common stock
for $2.65 per share in cash, with a supporting recommendation
from the Napster Board of Directors. The closing of the tender
offer is subject to customary terms and conditions, including
the tender of a number of shares that constitutes a majority of
Napster's outstanding shares of common stock (on a fully diluted
basis) and expiration or termination of the waiting period under
the Hart Scott Rodino Antitrust Improvement Act. The agreement
also provides for the parties to effect, subject to customary
conditions, a merger to be completed following the completion of
the tender offer which would result in all shares not tendered
in the tender offer (other than shares held by Best Buy,
treasury shares, and shares held by Napster shareholders, if
any, who properly exercise appraisal rights) being converted
into the right to receive $2.65 per share in cash. The directors
and certain officers of Napster have entered into agreements
with Best Buy pursuant to which they have agreed to tender their
shares in connection with the tender offer contemplated by the
merger agreement and otherwise support the transaction.
Napster, which recently launched one
of the world’s largest MP3 stores, had fiscal 2008 revenue of
$127.5 million, an increase of 15 percent over the prior fiscal
year; a loss of $16.5 million, an improvement compared with a
loss of $36.8 million the prior fiscal year; and positive cash
flow for the fiscal year ended March 31, 2008.
Best Buy intends to complete the
acquisition using available cash. UBS Investment Bank served as
the exclusive financial advisor to Napster, and Napster is
represented by O’Melveny & Myers LLP. Best Buy is represented by
Robins, Kaplan, Miller & Ciresi L.L.P.
About Best Buy
With operations in the United
States, Canada, Europe and China, Best Buy (NYSE: BBY) is a
multinational retailer of technology and entertainment products
and services with a commitment to growth and innovation. The
Best Buy family of brands and partnerships collectively
generates more than $40 billion annual revenue and includes
brands such as Best Buy, Audiovisions, The Carphone Warehouse,
Future Shop, Geek Squad, Jiangsu Five Star, Magnolia Audio
Video, Pacific Sales Kitchen and Bath Centers, and Speakeasy.
Approximately 150,000 employees apply their talents to help
bring the benefits of these brands to life for customers through
retail locations, multiple call centers and web sites, in-home
solutions, product delivery and in our communities. Community
partnership is central to the way we do business at Best Buy. In
fiscal 2008, we donated a combined $31.8 million to improve the
vitality of the communities where our employees and customers
live and work. For more information about Best Buy, visit
www.bestbuy.com.
About Napster
Napster, the pioneer of digital
music, offers the ultimate in interactive music experiences,
creating better ways to discover, share, acquire and enjoy music
-- anytime, anywhere. The Company's offerings include "Napster"
(www.napster.com)
-- the premier online music destination featuring the most
popular on-demand music subscription service in the world and
the largest, most comprehensive MP3 download store on the
market; "FreeNapster" (www.freeNapster.com)
-- a unique Web experience offering free on demand music
legally; and "Napster Mobile" -- one of the industry's fastest
growing mobile music platforms. Headquartered in Los Angeles,
Napster's services are available in markets across the Americas,
Europe and Japan.
Forward Looking Statements
This news release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the U.S. Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that reflect Best Buy and Napster managements’ current views and estimates regarding future market conditions, company performance and financial results, business prospects, new strategies, the competitive environment and other events. You can identify these statements by the fact that they use words such as "anticipate," "believe," "estimate," "expect," "intend," "project," "plan," "outlook," and other words and terms of similar meaning. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: failure to meet the minimum tender condition or obtain any required stockholder or regulatory approvals or satisfy other conditions to the transaction; failure to achieve anticipated benefits of the transaction; and integration challenges relating to the acquisition. Other factors include the following: general economic conditions, acquisitions and development of new businesses, divestitures, product availability, sales volumes, pricing actions and promotional activities of competitors, profit margins, weather, changes in law or regulations, foreign currency fluctuation, availability of suitable real estate locations, Best Buy's and Napster’s ability to react to a disaster recovery situation, and the impact of labor markets and new product introductions on overall profitability. A further list and description of risks, uncertainties and other matters can be found in Best Buy’s and Napster’s annual reports and other reports filed from time to time with the U.S. Securities and Exchange Commission ("SEC"), including, but not limited to, Best Buy's Annual Report on Form 10-K filed with the SEC on April 30, 2008, and Napster’s Annual Report on Form 10-K filed with the SEC on June 11, 2008. Best Buy and Napster caution that the foregoing list of important factors is not complete and assume no obligation to update any forward-looking statement that it may make.
Additional Information and Where to Find it
The tender offer for the outstanding common stock of Napster has not yet commenced. This document is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any securities. The solicitation and the offer to buy shares of Napster common stock will be made only pursuant to an offer to purchase and related materials that Best Buy intends to file with the SEC on Schedule TO. Napster also intends to file a solicitation/recommendation statement on Schedule 14D-9 with respect to the offer. Napster stockholders and other investors should read these materials carefully because they contain important information, including the terms and conditions of the offer. Napster stockholders and other investors will be able to obtain copies of these materials without charge from the SEC through the SEC’s Web site at www.sec.gov, from the Information Agent named in the tender offer documents, from Best Buy (with respect to documents filed by Best Buy with the SEC), or from Napster (with respect to documents filed by Napster with the SEC).
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