Best Buy Sheds Troubled Musicland Group
RICHFIELD, Minn. (AP) — Electronics retailer Best Buy Co. said Monday it has shed its troubled Musicland Group, turning it over to Sun Capital Partners, a Florida-based private investment company. Best Buy shares rose.
Sun Capital Partners paid no cash but assumed all of Musicland’s liabilities including its lease obligations.
Musicland operates around 1,100 Media Play, Sam Goody and Suncoast stores across the country. Best Buy said in March that it planned to sell the group.
Richfield-based Best Buy paid nearly $700 million for Minnetonka-based Musicland two years ago, but the group failed to meet Best Buy’s expectations, especially in consumer electronics sales. When Best Buy decided to cut its losses, it cited a decline in CD sales and a slowdown in shopping mall traffic nationwide.
“We are energized by Sun Capital’s record of restoring companies to profitability within its first year of ownership,” said Connie Fuhrman, who remains president of Musicland. “The sale is positive news for our employees, customers and vendors.”
Sun Capital Partners, based in Boca Raton, Fla., focuses on leveraged buyouts. Since it began in 1995, it has invested in more than 50 companies with combined sales of more than $7 billion, including retail and catalog companies Wickes Furniture, Bruegger’s Bagels, Miles Kimball, The Mattress Firm and Nationwide Mattress and Furniture Warehouse.
“Musicland is the nation’s leading entertainment software retailer with a strong, experienced management team and more than 10,000 dedicated, knowledgeable employees,” said Jason Neimark, principal of Sun Capital. “We’re excited to build on Musicland’s long-standing vendor relationships, loyal customer base and technological infrastructure.”
The transaction included all of Musicland’s operating assets, except for a distribution center in Franklin, Ind., that Best Buy will continue to operate. Sun Capital said it will buy transition support services from Best Buy for up to one year, until Musicland develops long-term solutions.
In morning trading on the New York Stock Exchange, Best Buy shares were up $2.04, or 4.9 percent, to $43.80.
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