Links With Onsale in $400M Deal

Cyber-merchant Inc. and virtual auctioneer Onsale Inc. this week agreed to a $400 million merger meant to boost their size in the cutthroat computer equipment retail arena.

Egghead, Vancouver, WA, and Onsale, Menlo Park, CA, want to pool their sales volume, marketing budgets and traffic. The firms also plan to “increase efficiency by eliminating duplicative operating costs,” they said in a statement.

The move comes as online retailers of computer goods and peripherals are struggling with tight margins and stiff competition. Egghead earlier fled the brick-and-mortar market after taking a beating there, and the company has not enjoyed a profitable quarter since the end of 1996. Onsale has fared as badly, suffering steadily mounting losses over the last two years.

If this year's trends continue, the new firm will have 1999 sales of about $500 million, the companies said.

Shares of Onsale and Egghead edged up slightly last week after the merger announcement. Overall, both firms' stock has plunged this year, with Onsale recently trading in the low 20s after peaking at 108 last November, and Egghead changing hands in the low teens after spiking at 40 _ late last year.

Under terms of the merger pact, the companies will exchange .565 shares of Onsale for each outstanding share of Egghead, leaving Egghead shareholders owning about 47 percent of the new firm. The company will keep the name but be headquartered in Menlo Park.

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