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.
