Barnes & Noble added to its collection of bricks-and-mortar stores last week when it agreed to acquire the video game and entertainment software store chain Babbage's Etc. for $215 million. The purchase price consists of $189 million in cash plus the assumption of $26 million in certain liabilities. In addition, B&N will make contingency payments of $10 million in 2001 and $10 million in 2002 if Babbage's meets performance targets. The deal is expected to close within 30 days.
The company's principal owner is B&N chairman Len Riggio, who acquired certain assets of what was then known as the NeoStar Retail Group after the company went bankrupt in 1996. Riggio, who was a director and shareholder in NeoStar, paid $58.5 million for 450 stores and renamed the company Babbage's Etc.
Based in Grapevine, Tex., Babbage's operates 495 stores under the Babbage's, Software Etc. and GameStop names, and recently launched a Web site (www.gamestop.com) to sell video games and personal computer software.
According to B&N, the Babbage's purchase is consistent with its goal of acquiring "complementary and high growth businesses." B&N chief operating officer Alan Kahn said that the integration of the product mix of B&N and Babbage's "affords additional opportunities for both revenue and bottomline growth."
Babbage's expects sales to increase more than 24% to $580 million for the year ending January 29, 2000, with EBITDA (earnings before interest, taxes, depreciation and amortization) rising to $42 million. Kahn added that the acquisition "is also very important to the positioning of our online affiliate, barnesandnoble.com, where the penetration of the fast-growing video game market is not only complementary, but can be considered essential." Kahn told PW that while there are no plans at present to establish a link between bn.com and GameStop.com, he expects bn.com "to sell a greater assortment of games in the future."
