It is finally official. RadioShack has filed for bankruptcy. This may be a sad day in retail, but if you have been a reader of 24/7 Wall St. for very long then you will not be surprised at all. Now we have confirmation that Sprint Corp. (NYSE: S) and General Wireless, a subsidiary of Standard General, have agreed in principle on terms that will allow Sprint to take over many of the leases.
Standard General is RadioShack’s largest shareholder. And in the deal announced, Sprint is said to be able to expand its branded store distribution by approximately 1,750 stores. Here is why this matters: Sprint currently has more than 1,100 company-owned retail stores. That means the deal, if approved, would more than double Sprint’s owned retail store count.
Thursday’s press release said:
The proposed transaction is part of the sale of a portion of RadioShack’s assets and assignment of certain leases to General Wireless Inc. Once the transaction is finalized and approved by the bankruptcy court, Sprint and General Wireless Inc. would establish co-branded stores that will exclusively sell mobile devices across Sprint’s brand portfolio as well as RadioShack products, services and accessories.
Sprint has also claimed that this will allow it to grow branded distribution quickly and cost effectively in prime retail locations.
The deal sounds good on the surface but it does not look riskless. Sprint’s press release shows that the terms would allow Sprint to effectively operate a store within a RadioShack store. Even though this would give Sprint roughly one-third of the retail space of each location, RadioShack is still attached here.
Sprint said that its employees will sell mobile devices and plans on all Sprint brands. That includes Boost and Virgin Mobile. The stores will also be co-branded with Sprint being the primary brand on storefronts and in marketing materials.
Increasing the locations is a great thing on the surface. The problem is this: will people start showing up to former RadioShack locations now that Sprint has a store (and a storefront) there too? Maybe, but maybe not. With RadioShack’s history of success, or lack thereof, it is a very fair question to ponder. Having co-branded stores may help, but we shall have to wait and see if the traffic increases handily.
Sprint also said that the transaction is expected to be finalized in the coming months, and it further said that the deal is subject to approval by a Delaware bankruptcy court and to a closing period.
At least you can now buy a record needle along with your next smartphone purchase.
Shares of Sprint closed up 5.2% at $4.82 on Thursday, and the stock was indicated up 2% at $4.92 in the after-hours trading session after the news broke. Its 52-week range is $3.79 to $9.76, and the consensus analyst price target outside of the news was $7.28.
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