Monday, September 15, 2008

Best Buy Buys Napster For $127 Million

Best Buy has agreed to buy Napster for a reported $2.65 per share all-cash deal or $127 million. The price is nearly double the music network's Friday closing price but a small sum to pay for Best Buy, which gets access to Napster's 700,000 subscribers who pay a monthly fee to access digital music catalogs.

In a statement, Best Buy valued the deal at $121 million, and said the difference was due to unvested employee stock awards at Napster. According to its most recently quarterly filing, Napster had about 47.9 million shares outstanding as of Aug. 8, implying a price of $126.9 million.

"It's not a huge investment, but it definitely has brand recognition," said Morningstar analyst Brady Lemos, who said Best Buy also benefits from the acquisition of technical expertise about the digital music industry.

Napster had $67 million in cash reserves, so Best Buy is essentially landing the company for $54 million.

Best Buy already owns RealNetworks Inc. and SanDisk Corp, so it seems like the company will be making a big push to get into a bigger piece of the digital music distribution service pie, which is currently dominated by Apple.

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