For months the speculation was that Best Buy or The Brick would acquire The Source By Circuit City stores in Canada. But, yesterday evening seemingly out of the blue Bell (TSX: BCE) became the The Source’s White Knight.
According to Bell sources, the company will retain all of the 750 stores across Canada in an attempt to leverage its national distribution network. It will also keep its retail name and be run independently of Bell. No word yet on if all current The Source by Circuit City employees will be retained. Ron Cuthbertson, the CEO the retailer and his full management staff will be keeping their jobs.
When the deal becomes final, Bell will carry the full array of Bell consumer services at the more than 750 The Source stores across Canada. This includes Bell Mobility, Solo Mobile and potentially Virgin Mobile wireless products and services, Bell TV’s High Definition television services, high-speed Bell Internet, and Bell Home Phone products, by January 2010.
Bell believes The Source stores would support its strategy of accelerating wireless and leveraging digital TV, high speed Internet and home phone offerings.
In a prepared statement, George Cope, president and CEO of Bell and BCE, said The Source is a respected leader in consumer electronics retailing right across Canada. Its acquisition supports Bell’s strategic imperatives to accelerate wireless and leverage momentum in wireline services like Bell TV, Bell Internet and Bell Home Phone.
He went on to say that with its strong national presence, brand, and management team, acquiring The Source represents a competitive and cost-effective approach to ensuring Bell’s leadership in delivering the best communications products to Canadians. Expanding the number of places people can buy Bell products is a core element in the execution of Bell’s strategy to achieve our goal: To be recognized by customers as Canada’s leading communications company.
Also from Bell, The Source opportunity presented a faster and more cost-effective approach to increasing Bell’s national distribution footprint than building out new retail locations because more than 70 per cent of Canadians live within five kilometres of stores operated or licensed by The Source, and more than 80 million technology-savvy consumers shop at The Source each year.
Unlike its former American parent, The Source in Canada has a track record of profitability over the past seven years. The latest revenue figured posted by The Source showed the retailer with approximately $643 million in the last 12 months.
Bell is acquiring substantially all of the assets of The Source, which was acquired by Circuit City Stores, Inc. in March 2004. On November 10, 2008, Circuit City and certain of its U.S. subsidiaries voluntarily commenced bankruptcy proceedings under Chapter 11 of the United States Bankruptcy Code and The Source commenced a voluntary proceeding under the Companies’ Creditors Arrangement Act (CCAA). Bell is acquiring The Source pursuant to the court monitored sale process being managed by NM Rothschild & Sons Canada Ltd. in connection with the proceedings under the CCAA.
This deal is expected to close by the third quarter of this year.