Egghead.com, Onsale merge

Computer World –

Onsale Inc. and Egghead.com Inc. are the latest companies to jump into the merger fray this week, with an announcement that Egghead.com and Onsale are combining in a deal worth approximately $400 million, the companies said today in a statement.

The deal is intended to keep the Egghead.com name and drive more traffic to Onsale's site, Onsale CEO Jerry Kaplan said in the statement.

Egghead, a computer software and hardware retailer, was one of the first companies to shut down all its brick-and-mortar stores to focus exclusively on selling online. Onsale is an Internet-only retailer that sells computer equipment at a discount and via auction.

The new company will have the Egghead.com name, with auctions and sales of surplus products operating under Onsale, the companies said. They said Egghead.com shareholders would own approximately 47% of the combined company.

One analyst said today's merger resulted from the pressure Egghead.com and Onsale faced in the electronics and auctions markets, respectively. The deal could have been sped up with Amazon.com Inc.'s entry into the electronics business, according to David Cooperstein, an analyst at Giga Information Group in Cambridge, Mass.

He predicts more consolidation in the electronics market by Christmas, with many companies likely to fail due to stiff competition.

Yesterday, online music retailer CDnow Inc. announced a merger with the Columbia House music club. CDnow was also under pressure from Amazon.com, which has made a major push into music sales.

Egghead.com and Onsale will have estimated combined revenues of $500 million this year, the firms said.

Onsale is based in Menlo Park, Calif., and Egghead.com is in Vancouver, Wash.

The new Egghead.com will be based in Menlo Park, with additional operations in Vancouver. Egghead.com CEO George Orban will serve as chairman, and Kaplan will act as CEO for the new company, respectively. Four directors from each company will make up the board of directors, with one director selected mutually, Onsale and Egghead.com said.

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