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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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FUNCO, INC.
(Name of Subject Company)
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FUNCO, INC.
(Name of Person Filing Statement)
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COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
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360762108
(CUSIP Number of Class of Securities)
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DAVID R. POMIJE
10120 WEST 76TH STREET
EDEN PRAIRIE, MINNESOTA 55344
(952) 946-8883
(Name, Address and Telephone Number of Person Authorized to
Receive Notice and Communications on Behalf of the Person Filing Statement)
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COPIES TO:
PHILIP S. GARON, ESQ.
FAEGRE & BENSON LLP
2200 NORWEST CENTER
90 SOUTH SEVENTH STREET
MINNEAPOLIS, MINNESOTA 55402
(612) 336-3000
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[X] CHECK THE BOX IF THE FILING RELATES TO PRELIMINARY COMMUNICATIONS
MADE BEFORE THE COMMENCEMENT DATE OF A TENDER OFFER.
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FOR IMMEDIATE RELEASE
CONTACTS:
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<S> <C> <C> <C>
Mary Ellen Keating Maureen O'Connell Maria Florez Stanley A. Bodine
Senior Vice President, Chief Financial Officer Director, Investor Relations President
Corporate Communications Barnes & Noble, Inc. Barnes & Noble, Inc. Funco, Inc.
Barnes & Noble, Inc. (212) 633-3338 (212) 633-4009 (612) 946-8883
(212) 633-3323
</TABLE>
BARNES & NOBLE AND FUNCO JOINTLY ANNOUNCE THAT
BARNES & NOBLE HAS AGREED TO ACQUIRE FUNCO
FOR $161.5 MILLION, BECOMING THE WORLD'S LARGEST
SPECIALTY RETAILER OF ELECTRONIC GAMES
Babbage's Etc. and Funco Combined Have Approximately
1,000 U.S. Stores and Two Web Sites
NEW YORK, NY -- May 4, 2000 -- Barnes & Noble, Inc. (NYSE: BKS) and Funco, Inc.
(NASDAQ: FNCO) today jointly announced a merger agreement under which Barnes &
Noble will acquire Funco, a Minneapolis-based electronic games retailer, for
approximately $161.5 million. Through its more than 400 FuncoLand stores,
primarily in strip malls, and Web site, HTTP://WWW.FUNCOLAND.COM, Funco markets
interactive home entertainment, primarily through the sale of new and previously
played video games, related hardware and accessories. Combined with the
complementary business of Babbage's Etc., acquired last year, Barnes & Noble,
Inc. becomes the world's largest video game and PC entertainment specialty
retailer.
Barnes & Noble will offer to purchase for $24.75 per share in cash all
outstanding Funco shares, or approximately $161.5 million, pursuant to a tender
offer expected to commence within two weeks. The acquisition is expected to be
completed in June and to be accretive to Barnes & Noble's earnings per share in
the current fiscal year. Funco has terminated its merger agreement with
Electronics Boutique Holdings Corp. in accordance with the terms of that merger
agreement.
The electronic games industry is one of the fastest-growing retail segments with
revenues that are expected to soon surpass total U.S. movie sales with
video-game and related revenue forecast to approach $10 billion next year.
"With this acquisition, we bring together the most knowledgeable specialists in
this industry and dramatically accelerate our multi-channel capability," said
Leonard Riggio, chairman and chief executive officer of Barnes & Noble, Inc. "As
the leader in providing video-game entertainment in retail outlets and on the
Internet, we are in a strong position to serve the rapidly growing and
diversifying video-game market, wherever and however video games are sold."
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"We are obviously pleased for our shareholders," said David R. Pomije, Funco's
chairman and chief executive officer. "We believe that this transaction will
provide opportunities for our employees, allow our business to benefit from the
synergies with Babbage's Etc. and offer the additional economic and other
advantages of being associated with a major retailer like Barnes & Noble."
Funco reported sales of $206.7 million for fiscal 1999 (ended March 28, 1999),
which included approximately $1.6 million in net sales from its Web site. For
the nine-month period ended January 2, 2000, Funco reported a 31 percent sales
increase as it generated revenues of $197.9 million, which included
approximately $3.1 million in Web site sales.
Babbage's Etc.'s chief executive officer, Dick Fontaine, and Dan DeMatteo,
chief operating officer, will lead the combined companies. Babbage's Etc. is
one of the nation's largest operators of video game and entertainment
software stores, with 540 stores, primarily in malls, under the
Babbage's-Registered Trademark-, Software Etc.-TM-, and GameStop-Registered
Trademark- names, and a Web site, HTTP://WWW.GAMESTOP.COM.
"Babbage's and Funco each serve different market segments, but have in common
outstanding and experienced personnel who are passionately committed to the
video-game business," said Mr. Fontaine. "Over the next 18 months, the business
is posed to achieve record sales with the introduction of Sony's Playstation II
in the fall, followed next year by Nintendo's Color Game Boy Advanced and
set-top Dolphin next-generation machines. In addition, Microsoft has announced
its entry into the business with the fall 2001 launch of the X-Box. This
acquisition positions us to take maximum advantage of these enormous sales
opportunities."
Barnes & Noble's acquisition of Funco is subject to the satisfaction of certain
conditions which include, without limitation, the following: (i) Funco
shareholders shall have validly tendered and not withdrawn a number of Funco
shares which, together with all Funco shares owned by Barnes & Noble and its
subsidiaries, represents at least 51% of the total voting power of Funco, and
(ii) the expiration or early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
About Barnes & Noble, Inc.
Barnes & Noble, Inc. (NYSE: BKS) operates 542 Barnes & Noble and 400 B. Dalton
bookstores, and Babbage's Etc., one of the nation's largest operators of video
game and entertainment software stores. Barnes & Noble stores stock an
authoritative selection of book titles and provide access to more than one
million titles. They offer books from more than 50,000 publisher imprints with
an emphasis on small, independent publishers and university presses.
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Barnes & Noble is one of the world's largest booksellers on the World Wide Web
(http://www.bn.com), and the exclusive bookseller on America Online (Keyword:
bn). Barnes & Noble.com has the largest standing of inventory of any online
bookseller. Barnes & Noble also publishes books under its own imprint for
exclusive sale through its retail stores, mail-order catalogs, and Web site.
General financial information on Barnes & Noble, Inc. can be obtained via the
Internet by visiting the company's investor relations Web site:
http://www.shareholder.com/bks/.
About Funco, Inc.
Funco, Inc., headquartered in Minneapolis, Minnesota, currently owns and
operates 404 FuncoLand video game retail stores that are predominantly located
in strip malls throughout the United States, and also operates an e-commerce
division, located at http://www.funcoland.com.
Safe Harbor
This press release contains "forward-looking statements." Barnes & Noble, Inc.
(NYSE: BKS) and Funco, Inc. (NASDAQ: FNCO) are including this statement for the
express purpose of availing themselves of the protections of the safe harbor
provided by the Private Securities Litigation Reform Act of 1995 with respect to
all such forward-looking statements. These forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially. These risks include, but are not limited to, the dependence on the
continued introduction of new and enhanced video games and PC hardware and
software; the cyclical nature of the video game market; the rapid technological
changes which occur in the video game and PC industry; the ability to open and
operate new stores on a profitable basis; the intensely competitive nature of
the electronic game industry and its rapid changes in consumer preferences and
frequent new product introductions; the seasonal nature of the retail industry;
the successful integration of acquired businesses; the dependence on suppliers
for products; and consumer spending patterns and prevailing economic conditions.
Please refer to each company's Annual Report on Form 10-K on file with the SEC
for amore detailed discussion of these and other risks that could cause results
to differ materially.
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES OF FUNCO, INC. AT THE TIME THE OFFER IS COMMENCED, BARNES &
NOBLE, INC. AND A SUBSIDIARY OF SUCH COMPANY WILL FILE A TENDER OFFER STATEMENT
WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND FUNCO, INC. WILL FILE A
SOLICITATION/RECOMMENDATION STATEMENT WITH RESPECT TO THE OFFER.
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THE TENDER OFFER STATEMENT (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF
TRANSMITTAL AND OTHER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION
STATEMENT WILL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY
BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. THE OFFER TO PURCHASE,
THE RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER OFFER DOCUMENTS, AS WELL AS
THE SOLICITATION/RECOMMENDATION STATEMENT, WILL BE MADE AVAILABLE TO ALL
SHAREHOLDERS OF FUNCO, INC. AT NO EXPENSE TO THEM. THE TENDER OFFER STATEMENT
(INCLUDING THE OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND ALL
OTHER OFFER DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION) AND THE
SOLICITATION/ RECOMMENDATION STATEMENT WILL ALSO BE AVAILABLE FOR FREE AT THE
SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT WWW.SEC.GOV.
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