May 2, 1997 in Nation/World

Egghead To Acquire Competitor Spokane-Based Company Buying Surplus Software In Deal Worth $31.5 Million

Grayden Jones Staff writer
 

After 17 lonely years, Professor Egghead is finally getting hitched.

Spokane-based computer retailer Egghead Inc. said Thursday it will buy Surplus Software Inc. of Hood River, Ore., for $31.5 million.

The deal weds two of the nation’s largest marketers of hardware and software and their trademark cartoon mascots - the white-haired Surplus “Granny” and Professor Egghead.

Surplus, with 166 employees, will remain in Hood River as a wholly owned subsidiary of Egghead, which currently employs 1,311 people. Officials expect few changes to the work force and plan to distribute the paper and electronic catalogs for both companies.

Egghead, which operates 86 retail stores, began courting Surplus Software last November when the two companies struck a joint venture to open a computer surplus store in Portland.

As part of the sale, Egghead will assume $5.6 million in debt held by Surplus, a direct seller of older-version computer hardware and software.

Egghead will issue 5.6 million new shares to Surplus’ 10 owners. That will give Surplus owners a 24 percent stake in Egghead, the largest single block of shares.

Surplus President Jon Brodeur and Chief Executive Officer Greg Boudreau will join Egghead’s board of directors.

The majority of Surplus’ owners have agreed to the deal. Egghead shareholders will vote on the deal at a special meeting scheduled in August.

“This is a good fit,” said George Orban, chairman and chief executive officer of Egghead, which employs 247 people at its Liberty Lake headquarters and North Division retail outlet.

“There are clear opportunities to build on synergies in management, product procurement, Internet commerce, marketing and retail distribution,” Orban said.

The announcement boosted Egghead’s closing stock price Thursday by nearly 19 cents a share, closing at $4.81.

Egghead is a national reseller of personal computer hardware, software, peripherals and accessories through its retail stores, catalogs and an Internet site, www.egghead.com. The company suffered a $10.7 million loss on sales of $271.8 million for the nine months ended Dec. 28, 1996.

In February, Orban announced a reorganization to close 77 of its 156 retail stores, trim 70 employees from the corporate staff and sell its Liberty Lake headquarters building.

Orban said in a statement Thursday that the reorganization has resulted in a 6 percent increase in continuing operations and reduced inventory from $92 million to $49 million during the fourth quarter ended March 29.

Surplus Software had sales of $35 million and a net loss of $1.2 million for the nine months ended Feb. 28. The 5-year-old company will receive a $2 million bridge loan from Egghead to fund Surplus’ expansion efforts until the company is absorbed, said Brian Bender, Egghead’s chief financial officer.

Surplus specializes in popular software and hardware, including Key Tronic Corp. keyboards. It also manages one of the nation’s busiest Internet sites, www.surplusdirect.com.

, DataTimes


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