Geeknet also announced that it had terminated its previously announced merger agreement with Hot Topic, Inc. Following discussion with both GameStop and Hot Topic, the Board of Directors of Geeknet determined that the GameStop transaction represented a superior proposal. Geeknet will pay Hot Topic a termination fee pursuant to the Hot Topic agreement, for which GameStop has agreed to reimburse Geeknet.
Paul Raines, chief executive officer of GameStop, stated, “This acquisition creates value to all stakeholders involved. The addition of Geeknet is an important expansion of our global multichannel platform and we are excited to leverage their product development expertise to broaden our product offering in the fast-growing collectibles category and deepen relationships with our existing customer base.”
“Our Board and management team believe this transaction is in the best interest of Geeknet and its stockholders,” said Kathryn McCarthy, chief executive officer of Geeknet. “As a part of GameStop’s family of brands, Geeknet will be well-positioned to achieve our goals of increasing our brand awareness and expanding our product offerings.”
The transaction provides a natural extension of GameStop’s existing product offering and is expected to add an immediate incremental $100+ million in annual net sales. The acquisition of Geeknet will enhance shareholder value through the following strategic benefits:
- Expands GameStop’s diversified revenue stream by adding ThinkGeek, the No. 1 brand in the fast growing collectibles category
- Once completed, the acquisition is expected to increase operating earnings, and has a targeted IRR that exceeds 20%
- Extends the company’s global, multichannel retail expertise – online, pickup-at-store, web-in-store and standalone retail
- Utilizes Geeknet’s proprietary product innovation capabilities and established portfolio of premier, hard-to-secure licenses
- Leverages GameStop’s operational expertise and infrastructure to address Geeknet’s profitability
- Drive deeper engagement with GameStop’s core customers, in particular the 40 million global PowerUp Rewards members, by offering them exclusive, unique and cutting edge merchandise related to their favorite entertainment
Under the terms of the definitive agreement, GameStop will commence a tender offer for all outstanding common shares of Geeknet, at $20.00 per share in cash. The tender offer is conditioned on Geeknet’s stockholders tendering at least a majority of Geeknet’s outstanding shares in the tender offer, clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. The acquisition is expected to close by the end of GameStop’s second quarter 2015. Geeknet stockholders representing approximately 21% of outstanding shares have committed to participate in the tender offer.
SunTrust Robinson Humphrey, Inc. served as financial advisor and Pepper Hamilton LLP served as legal advisor to GameStop. Guggenheim Securities served as Geeknet’s exclusive financial advisor and Wachtell, Lipton, Rosen & Katz served as its legal advisor.