Best Buy to acquire Napster for $121 mil

Service's 700,000 subscribers included in deal

Napster, once the bane of the music industry's existence, provided a rare safe haven for investors Monday courtesy of the company's decision to allow retailer Best Buy to purchase it for $121 million.

The sale agreement led to an 86% surge in the price of Napster shares, not bad considering that Monday was one of the worst days in Wall Street trading in six years.

Napster no doubt thrilled shareholders who had been used to seeing their investment in the digital music company shrivel while Apple's iTunes dominated the marketplace.

Napster shares had fallen 95% in the past six years before Monday's announcement. They rose $1.17 to $2.53 while Best Buy said it will pay $2.65 a share for the company.

Napster boasts 700,000 subscribers to its music service, allowing users unlimited access to millions of songs for as long as they pay at least $12.95 per month.

Best Buy said it expects to keep the Napster brand name and its top executives, including Napster CEO Chris Gorog, continuing to operate the business from its Los Angeles headquarters, where it employs 140 people.

Perhaps the best advantage from Best Buy's perspective is that Napster has about $67 million in cash and short-term investments on its books, essentially bringing Best Buy's net purchase price down to $54 million.

Napster's decision to sell itself effectively ends a proxy battle it had been waging with three dissident shareholders -- upset over a dismal stock price -- who had been angling for board seats.

On the other end of the entertainment stock spectrum on Monday, shares in Take-Two Interactive Software fell 24% after rival gamemaker Electronic Arts said it was withdrawing its $2 billion buyout offer.

Take-Two's shares dropped $5.32 on Monday to $16.57, making it the leading decliner on the THR Showbiz 50. EA tried unsuccessfully for seven months to convince Take-Two management, including media mogul Strauss Zelnick, to sell the company for $25.76 a share.