GameStop to acquire Electronics Boutique

LOS ANGELES -- Video game retailer GameStop Corp. said yesterday it would buy competitor Electronics Boutique Holdings Corp. for $1.4 billion in cash and stock, creating a company that would rival Wal-Mart in game sales.

Shares in Electronics Boutique jumped 34.3 percent, making it the top net gainer on Nasdaq, while GameStop rose 9.7 percent and was among the top percentage gainers on the New York Stock Exchange.

The combined entity would have more than 3,200 stores in the United States and 600 stores abroad, with annual revenues approaching $4 billion and a dominant position in the growing market for used games.

''The new, larger company should have a significantly stronger position in the video game retail market place, especially as the new console hardware systems launch later this year," Harris Nesbitt analyst Edward Williams said in a note.

Michael Pachter, an analyst with Wedbush Morgan Securities, called the acquisition a ''nice deal" that would probably be approved by the Federal Trade Commission.

Pachter suggested the combined company would have a market share of about 25 percent, while Banc of America Securities analyst Gary Cooper pegged the combined share at about 21 to 22 percent, roughly equal to Wal-Mart Stores Inc. in terms of game sales.

The jump in the stocks cut the premium Electronics Boutique shareholders will receive to just under 3 percent as of yesterday's close from the 34 percent premium the companies disclosed, which was based on Friday's closing prices.

Based on the share count of about 26.16 million Electronic Boutique shares GameStop said it used in calculations, the deal was worth $1.49 billion at yesterday's close.