Tuesday, June 23, 1998

CompUSA to buy Computer City from Tandy for $275 million in cash

By SUSAN MONTOYA Associated Press Writer

DALLAS (AP) - Eighteen months after a courtship that went nowhere, CompUSA is headed to the altar with rival retailer Computer City.

CompUSA announced Monday that it's buying the chain from Fort Worth-based Tandy for $275 million.

The deal is subject to regulatory approval but is expected to close within 90 days, the two companies said.

A decision on possible store closings won't be made until then, according to a CompUSA statement. Analysts say CompUSA likely won't keep operating all of the 256 stores it will have after the acquisition.

"CompUSA will probably close down a meaningful number of Computer City stores," said Peter Caruso, an analyst at Merrill Lynch in New York.

CompUSA indicated some people will lose their jobs. "We do expect to gain synergies and efficiencies," the company said in a statement addressing the question of layoffs.

Tandy is selling the sickly Computer City chain as it tries to sustain a turnaround it began last year. The company earned $186.9 million on sales of $5.3 billion last year after losing $91.6 million in 1996.

The sale "will allow us to completely focus on Radio Shack at a time when profits are at an all-time high," Tandy president Leonard Roberts said Monday. "Computer City was a losing operation for the company."

Tandy sold its 17 Incredible Universe stores in December 1996 when it decided the electronics superstore concept was too expensive.

Tandy's stock was up 9 percent, or $3.68-3/4 at $46.12-1/2, in afternoon trading on the New York Stock Exchange. CompUSA's stock was up 13 percent, jumping $2.12-1/2 to $18.37-1/2.

Dallas-based CompUSA has wooed Computer City before, but talks broke off in February 1997.

This time, analysts say both CompUSA and Tandy will end up in better financial shape.

Industry leader CompUSA eliminates its biggest competitor and Tandy gets rid of a drag on its earnings, said George Sutton of Rauscher Pierce Refsnes in Dallas.

CompUSA had fiscal 1997 sales of $4.61 billion, while Computer City had 1997 sales of $1.9 billion. Computer City started out strong in 1991 but had been struggling to improve sales and profits since 1995.

CompUSA operates 160 U.S. stores and offers its own build-to-order line of personal computers. In its statement, the chain said it was sticking with its current plan to open 20 stores this fiscal year.