MUSICLAND CONFIRMS TALKS FOR POSSIBLE MERGER

Musicland dropped a bombshell today, confirming that it is in talks with "an unidentified third party regarding a possible business combination." Inside sources confirm that the buyer is indeed Best Buy. Rumors have abounded for weeks that the Minneapolis-based retail chain was being courted by Best Buy, but most industry watchers intially discounted the story as chat-room fodder.

Best Buy has built its 400-store empire one market at a time, usually opening five to seven stores at once. Expansion through acquisition has never been their game plan, but the game plan has obviously changed. Our sources tell us that it is a stock-swap with a possible third party involved.

Questions abound: If there is a an additional party, who is it? Will the current buying and management staffs stay in place and operate the two entities, both mall and free-standing, seperately? Musicland President/Chairman/CEO Jack Eugster and Sr. VP Purchasing Dick Odette are music industry institutions. What will be their roles, if any, in the new combined company?

Trading was halted on Musicland's stock, up $1.94 today to a 52-week high of $9.94. At presstime Best Buy's stock is down $2 to $28.63.

Stay tuned…