Circuit City Stores Inc., the number 2 U.S. consumer electronics chain, said it plans to buy InterTan Inc. for U.S. $284 million in cash, expanding its battle against top rival Best Buy Co. Inc. into Canada.
Circuit City also reported higher-than-expected quarterly earnings on lower expenses and increased finance income. The retailer said it would buy online music seller MusicNow Inc. as well. Terms were not disclosed.
Circuit City, which has been revamping stores as it tries to claw back ground lost to Best Buy during the last 3 years, said it plans to expand sales of InterTan's private-label electronic products into the United States by the fall. Private-label goods typically carry higher profit margins than brand-name products.
Circuit City said it agreed to acquire InterTan for $14 a share in cash.
InterTan, based in Barrie, Ontario, Canada, operates about 980 stores in Canada under the names RadioShack, Rogers Plus and Battery Plus. InterTan's top rival, Future Shop, is owned by Best Buy. In its 2003 fiscal year ended June 30, InterTan had revenue of $403.1 million and net profit of $7.7 million
Circuit City operates about 600 stores in the United States.
Circuit City said it expects the purchase of InterTan will add to its earnings in the current year.
Circuit City, which recently closed 19 money-losing stores in the United States, said profit in the fiscal fourth-quarter ended Feb. 29 rose to $89.6 million, or $0.43 a share, from $70.9 million, or $0.34 a share, a year ago.
Excluding discontinued operations, quarterly profit was $0.46 a share. Analysts, on average, had expected earnings of $0.36 a share, according to Reuters Research.
Stacey Widlitz, an analyst at Fulcrum Global Partners, said she was surprised at the timing of the InterTan acquisition, noting that it comes as Circuit City is trying to fix its business in the United States. (Reuters)
"It's certainly a distraction to what they are doing. Yes, it will help provide them with access to private-label products," she said.
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