GRAPEVINE, TEXAS -- GameStop will issue $950 million in debt to help finance its purchase of rival Electronics Boutique in a deal that's likely to close in early October. The merger will create a chain with more than 4,200 stores and annual sales of nearly $4 billion, rivaling Wal-Mart as the country's top game retailer.

GameStop received a green light from the Securities and Exchange Commission Sept. 6 to finalize its merger and now it's up to shareholders of both chains to decide on the $1.44 billion deal. GameStop and Electronics Boutique have scheduled their annual shareholders meeting for Oct. 6 and both chains are expected to approve the merger that day.

Analysts say the acquisition will make GameStop more competitive with larger retailers like Wal-Mart at a time when the game business is entering a new growth spurt. Microsoft is coming out with its new game console this fall and Sony and Nintendo will introduce their new platforms in 2006.

"They can see where the market is going and, rather than compete with one another, they're joining forces to create a real powerhouse," said David Cole, president of research firm DFC Intelligence. "Now they'll have about a 25% market share and they'll be on equal terms with Wal-Mart."

The biggest asset Electronics Boutique has is a large store base overseas. While GameStop has only a handful of its 1,980 stores located outside the United States (in Ireland), EB has nearly 750 of its 2,280 stores located in Europe. That gives GameStop an instant presence in Europe and a base for expansion.

"Clearly, that [EB's overseas stores] was a big selling point for GameStop," said Michael Pachter, an analyst with Wedbush Morgan Securities in Los Angeles. Since

EB first announced its merger plans with GameStop in May, they added Spain's 141-store Jump Ordenadores chain to their holdings.

The merger would also give GameStop a much larger share of the market--about double its current share of 10% to 15%--and give it more clout with game publishers and console manufacturers. That will come in handy when Microsoft launches Xbox 360 in Novemher and next spring when Sony unveils the new PlayStation 3.

"We expect the combined entity to command better allocations of the Xbox 360 and PS3 when they launch" noted Pachter.

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