Gamestop To Buy EBGames

Video game retailer GameStop Corp. on Monday said it would buy competitor Electronics Boutique Holdings Corp. for $1.44 billion in cash and stock, creating a company that would rival Wal-Mart in game sales.

Shares in Electronics Boutique jumped 34 percent, making it the top net gainer on Nasdaq, while GameStop rose 10 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.

The video game industry is preparing for a rocky transition as it moves from one generation of game console to a newer, more advanced model. That changeover is expected over the next 18 months, and such changes have historically led to fluctuating sales.

Michael Pachter, an analyst with Wedbush Morgan Securities, called the acquisition a “nice deal” that would probably be approved by the U.S. Federal Trade Commission. The agency will review antitrust implications of the transaction, which the companies hope to close before Labor Day.

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 percent to 22 percent, roughly equal to Wal-Mart Stores Inc. in terms of game sales.