Best Buy Plucks Napster; $121 Million All-Cash Deal

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Best Buy has now purchased Napster for $121 million, an all-cash deal that values the company at $2.65 per share.

The buyout, confirmed Monday morning, gives Best Buy a digital store to complement its hardware footprint.  “We can foresee Napster acting as a platform for accelerating our growth in the emerging industry of digital entertainment, beyond music subscriptions,” said Dave Morrish, executive vice president at Best Buy.

The per-share valuation essentially doubles the price from Friday, part of a relatively unenthusiastic response from Wall Street.  Napster board members approved the move, though the exit appears more of a relief than a bonanza.  The purchase includes Napster’s cash holdings of $67 million, an account that has been eroding over the past few years.  Currently, Napster carries a subscriber base of roughly 700,000, and the company now offers MP3s on the download side.

At the bell on Friday, shares closed at $1.36, and shares bumped upward to $2.52 on Monday.  NAPS has dropped nearly 57 percent over the past year, and nearly 62 percent over the past two years.  Napster lost $16.5 million on revenues of $127.5 million for the fiscal year ending March 31st.  The deal is expected to close during the current quarter.