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"Best Buy's vision is to be at the intersection of technology and life... Now, can somebody please help me program this TiVo?"
——Richard Schulze,
Best Buy Chairman/CEO
BEST BUY TO ACQUIRE MUSICLAND FOR $685 MILLION
Company Also Buys Magnolia Hi-Fi and Expands Into Canada, Eh?
As first reported here yesterday, Minneapolis-based Best Buy Co., Inc., launched an aggressive expansion program by agreeing to acquire its Twin Cities neighbor Musicland Stores Corporation for $685 million, which includes the assumption of $260 million in debt.

Best Buy Founder/Chairman/CEO Richard M. Schulze hummed a few bars of the Nielsen-Pearson Band before commenting: "These strategic moves position Best Buy to grow profits through new customers, new channels of distribution and improved operating efficiencies.  The acquisitions allow us to deliver digital entertainment technologies to consumer segments not currently served by Best Buy's store format, particularly in rural areas, malls, the early techology adopters, state fairs and tractor-pulling competitions."

Schulze will lead the combined companies as Chairman/CEO.  Musicland CEO Jack Eugster will join Best Buy's Board of Directors and Musicland Group senior officers will remain within the combined companies.  Best Buy Sr. VP Kevin Freeland will be upped to President of Musicland Stores Corporation.

Said Schulze:  "Kevin Freeland has a proven track record of success and 20 years of retail experience. He developed our world class inventory management systems, played a leading role in Best Buy's process to profits initiative, was instrumental in developing this acquisition strategy and has perfected the air of spit-polishing my loafers."

Musicland CEP Jack Eugster said:  "We share a common Midwestern heritage and a passion for retail.  This acquisition is a good strategic fit, which builds on our solid music foundation while providing an exciting opportunity to transform our stores.  Retention of talent is a priority within both organizations and creates new possibilities for employee development.  And we can pool our heating costs, which are through the roof for a Minneapolis winter."

In addition, Best Buy announced it was about to acquire Seattle-based Magnolia Hi-Fi, Inc., a privately held chain of 13 high-end audio and video stores, for $87 million, and has signed eight leases in Canada as part of the first phase of an expansion which will add 65 Canadian outlets over a three-year period.

The Musicland acquisition is expected to close in the first quarter of 2001.  Best Buy will tender an offer of cash for stock in the amount of $12.55 per share.  In trading today, Best Buy was at 23 15/16, down 4 7/8, while Musicland was at 12 1/4, up 2.

Added Schulze:  "Best Buy's vision is to be at the intersection of technology and life.  To realize this vision, we must come to market using a variety of branding concepts and operational formats.  This growth strategy accelerates the implementation of our vision through new customer segments and substantiates our presence as the world's pre-eminent technology and entertainment player.  Now, can somebody please help me program this TiVo?"

 

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