Best Buy Inc. said Monday it will acquire struggling online music-sharing site Napster Inc. for more than $121 million cash in an effort to boost its digital media offerings.
The Minneapolis-based consumer electronics retailer said it would begin a tender offer for all outstanding shares of Los Angeles-based Napster for $2.65 per share, representing a 95 percent premium to the stock’s closing price of $1.36 per share on Friday.
Best Buy valued the deal at $121 million, or $54 million after recovering $67 million from Napster’s cash and short-term investments. However, Napster had about 47.9 million shares outstanding as of June 30, which would put the price closer to $127 million. The company said it would use available cash to fund the deal.
“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, Best Buy’s chief operating officer, in a statement. “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 partnered with RealNetworks Inc. and SanDisk Corp. two years ago to create a digital music subscription service and compatible media player. But, like Napster, the company has not been able to gain on Apple’s dominant iTunes service. The company is said to be particularly interested in Napster’s developing mobile phone technologies and its customer service operations.
The acquisition is expected to close in the fourth quarter. Best Buy said it did not expect to relocate the company, and senior management have signed employment agreements to remain with the company. Napster, which has 700,000 subscribers, employs around 140 people.
Napster said it will postpone its annual meeting of stockholders set for Thursday due to the acquisition agreement. The company had been facing a proxy battle from a dissident shareholder group which contended management and directors had bungled the company’s response to a changed digital music environment.
Napster shares closed up $1.17, or 86 percent, to $2.53 on the Nasdaq.
