Central South, Value Music Retail Chains To Merge

The planned merger between Central South Music Sales and Value Music marks the second time this summer that a marriage between two independently financially sound chains has occurred, as music specialty merchants attempt to negotiate the increasingly tough retail market.

The deal, which has a signed letter of intent with a closing expected in late summer, will create a new company with 123 stores and about $140 million in revenue. Nashville-based Central South runs 73 stores under the logos of Sound Shop and Music for Less; Valley Music operates 50 stores, mainly under the name Music for a Song, with two locations carrying the Spin Street logo.

Also this week (29), the merger between CD World and Streetside to create a 19-store chain with $33 million in revenue (Billboard Bulletin, May 9) is expected to close.

In the deal announced July 23, Central South will own 60% of the new company, with Value Music owning the rest, although the board of directors will be split evenly between the two parties. Central South president Randy Davidson says the new entity will include the Central South one-stop operation but not the Christian and gospel music distribution business, which Central South will wholly retain.

The company will use the Central South warehouse and the Value Music computer systems, Davidson confirms. The new company will have a $25 million revolving credit facility, supplied by Fleet Financial.

Davidson says the merger will result in the adoption of the best business practices of both chains. Rob Perkins, president/CEO of Atlanta-based Value Music, adds, "When you put these companies together, one plus one equals three." Davidson will be CEO and Perkins president of the merged company.

Davidson says that the merger is a perfect marriage because both organizations have tremendous integrity. Perkins adds, "We have been friendly competitors for many years and have mutual respect for one another."

Discussing how the merger came about, Davidson says, "Everyone knows the state of the industry. It became necessary [for] the two companies [to] come together to form a much stronger organization." Similarly, David Lang, who will head the merged CD World/Streetside chain, agrees that the environment is forcing strong chains to merge in order to remain competitive with discount department stores and consumer electronic chains.