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To: ColtonGang who wrote (17008)	12/7/2000 11:58:54 AM
From: Cooters	Respond to of 60323

Best Buy Shares Fall on Plans to Buy Musicland, Magnolia Hi-Fi --From AOL. The CEO was just on CNBC and was highlighting how they plan to turn Musicland stores into distributors of digital products. Fantastic stealth news for SNDK.-- Cooters Eden Prairie, Minnesota, Dec. 7 (Bloomberg) -- Best Buy Co. shares fell as much as 27 percent after the No. 1 electronics chain agreed to buy Musicland Stores Corp. for $685 million and Magnolia Hi-Fi Inc. for $87 million to expand into malls. Best Buy dropped $3.94, or 14 percent, to $24.88 in late morning trading of 6.7 million, more than double its three-month daily average. Earlier, the shares fell to $21. Musicland Stores rose $2.06, or 20 percent, to $12.31. Chief Executive Richard Schulze plans to use Musicland's Sam Goody and On Cue chains and closely held Magnolia's stores to sell more MP3 players, satellite systems and other electronics found at bigger Best Buy locations. The acquisitions will reduce Best Buy's fiscal fourth-quarter profit by 5 cents a share. Investors are concerned about the company's decision to expand when the music business is sluggish and the U.S. economy is slowing down. ``There's a lot of moving pieces in what they announced today,'' said Doug Gordon, an analyst at Banc of America Securities, with a ``buy'' rating on the stock. ``People are concerned about (Best Buy) entering into the music business at the time while the music business seems to be deteriorating.'' The Eden Prairie, Minnesota-based company said it made a stock tender offer of $12.55 a share for Musicland, the biggest mall-based U.S. specialty chain of music and videos. That's a 22 percent premium over Musicland's closing price yesterday. Best Buy also is assuming $260 million in debt, the company said. It is paying cash for closely held Magnolia. Rival RadioShack Corp.'s shares also fell on concern that it may be hurt by Best Buy's expansion into malls. RadioShack fell $5.94, or 11 percent, to $45.75, and earlier dropped as much as 14 percent to $44.31. Effect on Earnings Best Buy is expected to earn 86 cents a share in the fourth quarter ending in February, according to the average estimate of analysts surveyed by First Call/Thomson Financial. The addition of Musicland and Magnolia will add 15 cents to 20 cents a share to Best Buy's earnings starting in fiscal 2003, the company said. Minneapolis-based Musicland, which also owns Suncoast Motion Picture Co. and Media Play stores, had sales of $1.89 billion last year. Magnolia Hi-Fi, based in Seattle, had sales of about $100 million last year. Both Musicland and Magnolia will operate autonomously as wholly owned subsidiaries, Best Buy said. Best Buy also said it will expand into Canada for the first time. It has signed eight leases in Canada and expects to open about 65 stores there over three years beginning in fiscal 2003. Best Buy has 413 stores in 41 states and is expected to have about $15 billion in sales this year. Dec/07/2000 11:34 ET