Wherehouse makes offer for music chain
Viacom has received a substantial offer for its nearly 400-store Blockbuster Music chain from rebounding retail group Wherehouse, according to sources.
If the $25 million to $30 million deal closes, it would end Viacom’s three-year search for a buyer of the beleaguered Blockbuster music chain and make Wherehouse the industry’s second-largest retailer.
The bid marks the latest offer from potential buyers for Blockbuster, which has also included TransWorld.
Investment bankers Cereberus Partners own a majority stake in the Torrance-based Wherehouse and have aggressively been expanding their holdings in the music industry.
The group, which has taken a look at other chains that have come up for sale, also has a small stake in music retailer National Record Mart.
Wherehouse biggest bid
But the Wherehouse bid, according to sources, has been the largest and puts it at the top of Viacom’s short suitor list.
Execs at Wherehouse and Blockbuster declined comment.
But the deal would add nearly 400 stores to the 220 tally of Wherehouse.
Wherehouse, which successfully emerged from bankruptcy two years ago, has plans to open 10 additional stores later this year. Musicland Group operates a total of 1,363 stores — 703 of which are Musicland/Sam Goody outlets.
Viacom chief Sumner Redstone recently declared Blockbuster’s video operation fixed, and the revenues from the 6,000-store chain helped shore up the conglom’s bottom line in its earnings statement released earlier this month.
Blockbuster Music posts loss
But Blockbuster Music posted a $2.5 million loss on $133 million in revenues, which declined 6.8%. The number of its stores declined to 393 during the year, reflecting the shuttering of 77 unprofitable stores.
The potential sale of the Blockbuster chain comes as its execs have been downsizing its operation since hiring former Musicland exec Larry Gaines as prexy.
Blockbuster’s music operation differs from most music retailers as it typically only stocks top current or hit titles and carries little catalog product.
Gaines was given a mandate to trim overhead and make the chain’s numbers attractive for a sale. Viacom also tapped investment bankers Wasserstein Perella to locate and qualify suitors.
The chain is on the block just as the music industry retail environment has rebounded from previous years and music retailers are at their healthiest.
As a result, the more well-managed chains have once again become darlings of Wall Street.
The stocks of several outfits are trading at top prices and chains such as Camelot and rackjobber Valley Media have prepared public offering statements.