Kraft

1
GameStop /
Transaction Summary NYU - Stern School of
Business September 2005
Citigroup Global Markets Inc. acted as financial
advisor to GameStop and lead underwriter for
GameStops 950 million HY bond offering
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Acquisition of
On April 18, 2005, GameStop Corp (NYSE GME)
announced that it had agreed to acquire
Electronics Boutique Holding Corp (NYSE ELBO)
for approximately 1.44 billion
Strategic Rationale
Transaction Overview

• Creates the largest specialty video game retailer
• Permits GameStop to compete more effectively with
  a growing competition base
• Strong platform for growth in Europe and
  Asia-Pacific
• Similar operating strategy will facilitate
  integration
• Immediately accretive to cash flow and EPS
• Meaningful synergies starting in fiscal 2006
• Combined size dramatically enhances pro forma
  operating cash flow and ability to rapidly
  de-lever

• GameStop and Electronics Boutique will be merged
  in a transaction consisting of approximately 70
  cash and 30 stock consideration
• Transaction price is 55.18 per Electronics
  Boutique share (34 premium to ELBO closing price
  on 4/15/05) consisting of
• 38.15 in cash
• 17.03 in stock (0.78795 share of GameStop Class
  A common stock for each Electronics Boutique
  common share)
• Transaction value of approximately 1.44 billion
  at announcement
• Cash portion funded primarily with debt and
  excess cash
• Fully committed 1.35 billion financing package
  provided by Citigroup, Banc of America Securities
  and Merrill Lynch

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Long-Term Advisory Relationship
9/21/2005 950 million HY Offering
4/18/2005 EB Acquisition
21/3/2002 IPO
11/12/2004 Barnes Noble Spinoff
Citigroup has been the advisor of choice to
GameStop as it has grown its business, from its
IPO to its ascendancy as a preeminent video game
retailer
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Pro Forma Company Summary
Pro Forma Financial Statistics as of 7/30/05(1)
U.S. Video Game Market Share (3)
Total Revenue (1) Adj. EBITDA with Synergies
(1) Equity Value (2) Firm Value (2)
4,227 Million 309 Million 2.8 Billion 3.7
Billion
OTHER
GameStop
11.0
8.0
GameStop
Combined Stores 4,260
Summary Highlights

• Pro forma latest twelve months as of July 30,
  2005. LTM Adjusted EBITDA includes estimated
  first full year synergies of 30 million.
• As of September 9, 2005.
• Wall Street research.

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Background to the Transaction

• GameStop and EB are the two largest specialty
  video game retailers and have continuously
  competed for real estate, customers, etc.
• At various times in the past, GameStop and EB
  have explored the option of combining the two
  companies
• In early 2005 EB approached GameStop regarding a
  potential acquisition of GameStop
• Throughout early 2005 negotiations continued
• As negotiations waned, GameStop considered the
  acquisition of another video game retailer
• In March of 2005 GameStop approached EB regarding
  the acquisition of EB
• Throughout April negotiations continued and
  GameStops acquisition of EB was announced on
  April 18, 2005

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Why Do a Deal Now?
Cycles Within Cycles
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Transaction Valuation
Transaction Valuation and Multiples
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Reaction to the Transaction
Stock Price Reaction
Wall Street Research Analyst Reaction
Electronics Boutique
Strategically, we think this is a great deal. We
estimate that a combined GME/ELBO will have
market share in the low-20 range, which would
make it the 2 video game retailer behind
Wal-Mart. UBS
We view specialty retailer GameStops plans to
acquire EB - creating the leading specialty video
game retailer - as a strategic and financial
positive move. Citigroup
GameStop
We think that this deal is a significant
positive for both Electronics Boutique and
GameStop. We believe that investors will view
this deal positively and expect shares of both
companies to trade up over the next few weeks.
Wedbush Morgan Securities
Since the announcement of the transaction,
GameStops stock price has increased 60,
reflecting the strategic impetus for the
combination
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Financing Summary

• The financing structure was a key consideration
• Possible combinations of bank debt, high yield
  debt, asset backed debt, convertible debt and
  equity were considered
• GameStop ultimately decided on a combination of
  high yield debt and equity
• Equity was issued to EB shareholders
• 423 million at pre-announcement price (700 at
  current price)
• Allows EB shareholders to maintain some upside
• Keeps leverage levels reasonable
• High yield debt was issued to fund the cash
  portion
• 950 million of senior unsecured notes
• Issuance of a significant amount of debt allowed
  GameStop to minimize potential transaction
  dilution

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Issues
Financing Issues
MA Issues

• GameStop was a new issuer to the high yield
  market as was the video game retailing industry
• Neither GameStop or Electronics Boutique has
  historically employed leverage
• Specialty retailing has witnessed many failures
  and bankruptcies which has effected the high
  yield markets
• Hurricane Katrina, rising oil prices and an
  overall worsening economic environment resulted
  in a difficult pricing environment
• Significant supply of high yield offerings and in
  particular retail offerings

• The combination of the two largest specialty
  video game retailers entailed significant
  antitrust risk
• Financing structure
• Leverage vs dilution
• Management of the combined company
• Shareholder vote delayed significantly due to SEC
  disclosure requirements relating to the used
  business

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Role of the Associate

• You are the day-to-day point person for internal
  and external team members
• You are the point of contact for all product
  groups
• You are in the weeds
• You have to be right, all the time
• As an Associate, you will take a leading role in
  the follow deal aspects
• Building the financial model and valuation
• Internal processes Fairness Committee,
  Commitment Committee
• Rating agencies
• Road show

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Why Citigroup?
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GameStop
QA
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Important Recruiting Information
Key Citigroup Contacts

• Bill Bradley Director - MA and Team
  Co-Captain william.l.bradley
• Jamie Sunday Associate - Real Estate
  james.sunday
• and Team Co-Captain
• Vincent Love Associate - Consumer vincent.love
• Rajbir Anand Associate - Chemicals rajbir.anand
• Brendan Behlke Associate - Generalist brendan.behl
  ke
• Andres Ondarra Associate - Generalist andres.ondar
  ra

Key Dates
October 24 Corporate Presentation at 388
Greenwich Oct 25 Nov 11 Informational
Interviews at 388 Greenwich December 2 Day on
the Job at Citigroup December 2 Resume Submission
Deadline