Superstore follows rival, purchasing 980 stores across Canada
Chris Sorensen
Sun
Part of the deal, which has been approved by both boards, involves the sale of some of InterTAN’s private label products in Circuit City’s U.S. outlets. CREDIT: Associated Press
TORONTO — American electronics retailer Circuit City Stores Inc., is following its chief rival into Canada with the purchase of InterTAN Inc., owner of the 30-year-old Radio Shack brand.
Richmond, Va.-based Circuit City, which operates 599 electronic superstores in the United States, said Wednesday it is offering $284 million US, or $14 a share, for InterTAN’s 980 retail stores across Canada.
Circuit City‘s move follows market leader Best Buy Co.’s foray into the Canadian market in 2001, when it bought 91 Future Shop locations for $377 million. Best Buy has since pursued a “dual-branding” venture in Canada, adding new stores and operating both brands side-by-side in some markets.
Circuit City, however, which has also bought a privately held music download company for an undisclosed amount, said the company is not planning a similar strategy.
“Our intention is to operate the InterTAN brand stores as they are today,” said company spokesman Bill Cimino. “We want the same folks running them. We think they have a great management team and we think they are a great company, and it’s our intention to let them continue to run their stores as they have been.”
In addition to the Radio Shack stores, InterTAN operates Battery Plus and Rogers Plus outlets in Canada. The Barrie, Ont.-based company posted profits of $7.7 million on sales of $403.1 million in the fiscal year ended in June.
Part of the deal, which has been approved by the boards of both companies, involves the sale of some of InterTAN’s private label products in Circuit City‘s U.S. outlets.
Jim Maddox, InterTAN’s chief financial officer, said those products will be made up of various “gifts and gadgets,” such as flashlights and digital clocks.
“Those are all types of things that we carry that [Circuit City doesn’t] have in their stores today,” Maddox said.
Circuit City is no doubt hoping the InterTAN deal will help it close the gap in market share between itself and Best Buy, whose sales at stores open at least 14 months increased 9.7 per cent in the most recent quarter — mostly at the expense of Circuit City, whose sales rose just one per cent.
The sales gain was the first in five quarters for Circuit City and followed a company decision to close down 19 outlets and cut 900 jobs in February. Profits during the period rose 26 per cent to $89.6 million.
Meanwhile, Best Buy saw its profits in its most recent quarter jump 51 per cent to $469 billion, fuelled in part by strong holiday sales of televisions and digital cameras.
Circuit City, whose stock has doubled in the past year, closed up 60 cents Wednesday to $11.30 US on the New York Stock Exchange.
On the Toronto Stock Exchange, InterTAN’s shares climbed $3.24 to close at $18.24.
© The Vancouver Sun 2004
