iEN To Expand Into Distribution Business

After iEntertainment Network (NASDAQ: IMGK) announced last Thursday that it had signed a letter of intent to acquire three hobby and games distributors, its stock briefly soared three points, a high point in IMGK stock since early May. Stock trading was even halted by NASDAQ while it confirmed the news article.

The news came at an interesting crossroads in the future of iEN, as threat of delistment loomed, and the announcement that Jim Hettinger, founder and former CEO of MPG-Net (which iEN, then known as Interactive Magic, acquired in January) would be iEN's new CEO. Hettinger would replace J.W. "Wild Bill" Stealey, who is stepping down.

The three distributors to be acquired - Alliance Games Distribution; Berkeley TopLine; and Zocchi Distributing, known as BZA - reportedly have a combined total gross revenue of $42 million. Charles Tyson, former CFO of Alliance Games Distribution, would be the president of the new distribution division.

Some outsiders are wondering how iEN could even think about acquiring a group of distributors with a combined revenue twenty times its own. According to iEN, its revenue for the first six months of 1999 was $2.1 million. The answer is the promise of IMGK stock. Whether iEN's intent to acquire these distributors is merely a delaying action remains to be seen. BZA has just started dealing in e-commerce, an area iEN thinks it can excel.

"Consistent with our recent strategy of concentrating on the development of Internet communities such as GameHub.net, iEntertainmentNetwork.com, and TheGamers.net, this acquisition positions iEN as a full-service entertainment destination," said Hettinger. "The product offerings from BZA fit in well with our target customer in these entertainment communities and create a tremendous opportunity for cross-selling. As part of our continued focus on developing integrated entertainment communities, iEN will continue to build relationships that match our company's fundamental operating model and bring the best possible partners into the iEN family."

Near the end of the day, iEN stock was floating right at two points.