GameStop Will Always Have Paris
By Rick Aristotle Munarriz
October 1, 2008
GameStop (NYSE: GME) sells a ton of Wii consoles. Now it gets to say "oui" too.
The video game retailer is snapping up Micromania, a French chain with 332 stores. GameStop already has more than 700 locations throughout Europe, but this is its first foray into France.
The deal will set GameStop back roughly $700 million. It will also be immediately accretive to GameStop's bottom line. That is typically indicative of the buyer getting a good deal or that the acquirer was carrying a lofty valuation.
Thankfully for GameStop investors, shares of the world's leading hub for diehard gamers are not trading at some exuberant multiple. The retailer is fetching just 11 times next year's projected earnings, and the company is still on track to grow its bottom line by at least 25%.
I have my concerns, of course. Digital delivery and the shift to bigger stores found me comparing GameStop's trajectory to that of Blockbuster (NYSE: BBI) two weeks ago. I then offered up three related investments that I think will outperform GameStop itself.
However, I'll wiggle my way out of my bear costume long enough to say that I like this move. Any acquisition of a promising rival that is not dilutive to earnings is refreshing. I also like the overseas push, because it gives the company a greater presence in regions that may be further along the digital delivery migration than you will find domestically.
The industry's push towards console and storefront exclusivity is troublesome. The next two episodic installments of Take-Two Interactive's (Nasdaq: TTWO) Grand Theft Auto IV will be digital downloads available only to Microsoft (Nasdaq: MSFT) Xbox owners. Even Wal-Mart (NYSE: WMT) is getting into the mix, as AC/DC Live: Rock Band Track Pack will only be sold at the discount department store behemoth that Sam Walton built.
In short, if GameStop's days as a one-stop shop stateside are numbered, it's good to see it reaching for the passport.
Oui? Wii!
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