Best Buy said on Monday it sold its money-losing Musicland music and video chain to Sun Capital Partners which will take on all the unit's liabilities but not pay Best Buy any cash.
With a music industry slump hurting CD sales, Best Buy, the No. 1 U.S. electronics retailer, has been looking since March to sell Musicland, whose chains include Sam Goody.
Best Buy shares were buoyed by the news in early trading, rising $1.84, or 4.4 percent, to $43.60 on the New York Stock Exchange.
“Good riddance,” was the title of a brief J.P. Morgan research note regarding the sale.
“In essence, it appears that Best Buy gave it away,” analyst Danielle Fox said. “Musicland is a loss making, cash user with exposure to secular declines in pre-recorded music and mall traffic.
“Management’s ability to unload these assets is impressive,” said Fox, who maintained a “neutral” rating on the shares.
A unit of privately held Sun Capital of Boca Raton, Florida, will take over all Musicland’s operating assets except for an Indiana distribution center, Best Buy said.
In April, Best Buy reported $67 million in quarterly losses from discontinued Musicland operations.
Musicland, which has about 1,100 stores and more than 10,000 employees, will buy transition support services from its former Minneapolis-based parent for a year, Best Buy said.
“We are energized by Sun Capital’s record of restoring companies to profitability within a year of ownership,” Connie Fuhrman, president of Musicland, said in a statement.
Source: Reuters
