Egghead Gains Ok For Merger

The merger between Egghead Inc. and Surplus Direct was consummated Thursday when share holders of both companies approved the deal.

Voting in a special meeting in Spokane, the merger was approved by 93 percent of the Egghead shares voting. Shareholders of Surplus Direct, a closely-held private company, approved the merger unanimously.

“This merger is a pivotal step in the company’s restructuring,” George Orban, Egghead’s chairman and chief executive officer, said in a news release Thursday.

“We believe that the combination creates synergies in management and strategic business options and that it will open new opportunities for Internet commerce, marketing, retail distribution and product procurement.”

Egghead is a Spokane-based retailer that has traditionally sold software at premium prices. But the company has struggled in recent years with that format, and has been seeking a new retail strategy.

Orban’s plan is to convert Egghead into a warehouse-type seller of “off-price” computer hardware and software.

Surplus Direct, based in Hood River, Ore., is a rapidly-growing seller of close-out computer hardware via catalog sales and direct Internet sales at bargain prices.

The companies will continue to operate independently of each other, with Egghead supplying cash and technology to fuel Surplus Direct’s growth. Surplus Direct will provide Egghead a source of inventory to stock its new stores, and will help Egghead grow its Internet direct sales operations.

The merger, which involved issuance of 5.6 million Egghead common shares to Surplus Direct shareholders, is valued at about $36 million. The price includes repayment by Egghead of $6 million in Surplus Direct debt.

Surplus Direct CEO Greg Boudreau and its president, Jon Brodeur, have joined the Egghead board of directors.

Surplus Direct shareholders will own approximately 24 percent of the outstanding shares of Egghead if all Surplus Direct stock options to be assumed by Egghead are exercised.

, DataTimes