GameStop announced today that it has a definitive merger agreement to purchase Electronics Boutique. A joint statement outlined the deal which will create the largest game-selling company in the world. Electronics Boutique reported $1.94 billion in sales last year. GameStop reported $1.84 billion in 2004.

According to the agreement, GameStop will pay $38.15 in cash and 0.78795 shares of GameStop common stock for each Electronics Boutique share. The cash-stock combination is worth $55.18 or 34.2 percent over EB’s $41.12 closing price on Friday.

As is typical in merger situations, both companies stock rose following the news. EB went up $14.50 as of press time and GameStop rose $3.10 overall since the news was made public.

Because neither company wanted to disrupt the 2005 sales season, you won't see any change till at least 2006. At that time, over 3,200 stores in the US and 600 others in Europe and Asia will be GameStops as all EBs make the change over. Company officials said the move would likely result in the closing of some EB stores in situations where two stores are in the same market, such as within the same mall.

Officials from both companies said the merger would be a good thing, and would help position them against stores like Wal-Mart and Blockbuster. The post-merger would give the new stores about 25 percent of the game retailer market.