BestBuy announced that it will buy music sharing service Napster.
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.
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. B
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.
"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."
"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.