Harvey Electronics and CoolAudio.com Propose Merger

Last August, we reported that brick-and-mortar retailer Tweeter Home Entertainment Group had aligned itself with online retailer Cyberian Outpost to leverage each company's respective strengths, both on- and offline. The trend continues as, last week, brick-and-mortar retailer Harvey Electronics announced that it has reached an "agreement in principle" with CoolAudio.com (see previous story) to merge the two companies through an exchange of common stock.

This is not the first time that Harvey has partnered up with a web business, as evidenced by its announcement last April to sell used gear through the eBay auction website (see previous story). Harvey and CoolAudio say that the proposed merger would result in CoolAudio's shareholders owning approximately 80% of the new entity. The combined companies would then reportedly have in excess of 16 million shares of common stock outstanding.

Harvey's Franklin Karp states that "There are tremendous synergies between Harvey Electronics and CoolAudio. . . . This merger will not only further enhance our traditional retail business, but more importantly, it will position us to capitalize on the convergence of information technology and the Internet." CoolAudio's Raj Bhatia adds, "This marriage will bring together the best of traditional brick-and-mortar stores with all the advantages of the Internet. It will serve as a blueprint for additional, similar, and equally complementary relationships across the country. . . . Through a developing nationwide network of installers, Harvey/CoolAudio will be able to deliver, set up, and demonstrate a home-theater system anywhere in the country."

Both Harvey and CoolAudio are based in New York, with Harvey operating seven retail operations in the area. CoolAudio operates fulfillment and customer-support operations in Charlottesville, Virginia.