GameStop buying EB Games

Former retail rivals to merge in $1.44 billion deal; new company will be biggest game-store chain in America.

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With the launch of the PSP, the unveiling of all three next-generation platforms, and the almost assured launch of the next-gen Xbox, 2005 was already shaping up to be a wild year for the games industry. Today, it got even wilder when the two top specialty game retailers in the US revealed they will soon become one.

At the beginning of the East Coast business day, GameStop Corp. and Electronics Boutique Holdings Corp., owner of EB Games, announced they had signed a "definitive merger agreement." In fact, the deal will see GameStop, which saw $1.84 billion in sales during its last fiscal year, buy Electronics Boutique, which sold $1.98 billion sales during its 2005 fiscal year.

A joint statement sent out by both companies outlined the deal, under which GameStop will pay $38.15 in cash and 0.78795 shares of GameStop common stock for each Electronics Boutique share. The cash-stock combination is worth $55.18, 34.2 percent over EB's $41.12 closing price on Friday. EB's stock rocketed skyward on the news and was up over $14.50 as of press time. GameStop stock also rose on the news, gaining more than $3.10 in value.

Upon its closing, the agreement will see the two companies merge operations under the GameStop banner, which will then fly over 3,200 stores in the US and 600 others in Europe and Australasia. However, to not disrupt plans for the 2005 holiday season, no changes will be made in either company's organization until 2006. Then, in mall locations where there is duplication in retail outlets, store closings will follow "when appropriate," according to a GameStop official.

Though technically a takeover, the GameStop-EB merger met with glowing approval from both parties. "This transaction makes a tremendous amount of sense from an operational, cultural, and synergistic perspective," said EB CEO Jeffrey Griffiths. "We will now be in an even better position to broaden our reach and generate further efficiencies for our business and our customers." Griffiths' role in the new company was not identified.

GameStop chairman and chief executive officer R. Richard Fontaine also had good things to say about the deal, which isn't surprising, as he will retain this top slot after the merger. "We are merging these two companies from a position of strength," he said in a statement. Fontaine also confirmed that one motivation was GameStop's desire to expand outside its traditional North American market. "This merger ... will enable us to enter new international markets and allow us to compete more effectively in the highly competitive US video game industry."

The new GameStop will be well suited to fight off competition from rivals like Wal-Mart and Blockbuster Video's Game Rush subchain. According to Reuters, the post-merger company will be the biggest game retailer in the US, controlling some 25 percent of the market.

Discussion

8 comments
orbasm
orbasm

that is kind of fudged up, eb games was always way better than gamestop, and apparently makes more money than gamestop, so i dont know how or why eb let gamestop buy them out. it would be better if it was a completely equal merge, let the eb stores run themselves still under eb and just have both companies divii up the cash accordingly.

ZeldaNut113
ZeldaNut113

EB Games is a thousand times better... God bless EB

Lloid_Aurion
Lloid_Aurion

Kind of sad to see EB games go....I remember there were 2 EB games in the part of the country I I used to live in. Now I wonder if they are even going to bother to change the name sinc emy country basicaly sucks right now lol.

chupamiubre
chupamiubre

yes.but i cant belive there are only 3 postost on this topic i mean this effects every gamer pretty much then when the changes actually take place people will scream bloody murder and say i never heard about this it CRAP is what it is i hate this and just want to snap

iball
iball

It will translate into higher prices for the consumers due to lack of competition is what it will mean. And no more used pc games either.

chupamiubre
chupamiubre

moron no it wont it means less games one company same games every where

darkerboo
darkerboo

that store is going to be cool because 2 store combined with videogames!!!!!!!!!!!! I LOVE VIDEOGAMES