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Musician's Friend joins forces with Guitar Center Inc. By David Preszler Musician's Friend has made a powerful new pal. The Medford company plans to merge with Guitar Center Inc. in a $50 million deal that would bring together two leading forces in the musical instrument business. "This is a wonderful marriage," said Al Bessin, chief operating officer of Musician's Friend. Guitar Center is the world's leading retailer of musical instruments and equipment and did $391.7 million in sales last year. The publicly held company is based in Agoura Hills, Calif., and trades on the Nasdaq exchange as GTRC. Musician's Friend, which did $97 million in sales in 1998, is the world leader in the sale of instruments and gear by mail and over the Internet. The move would give Musician's Friend financing to continue growing and a strong retail partner. It would allow Guitar Center to become the force in mail order and e-commerce that it longs to be. The deal would give the combined company 61 retail stores and a mailing list of 4 million customers. Officials hope the deal, announced Thursday, will close by the end of this month. The merger will require regulatory approval that could delay things until the end of June. The deal isn't expected to change the Medford operation, which employs about 165 people. The company abruptly laid off 68 people in February when it closed its Medford call center, but Bessin said the number of employees here won't drop with the merger. Rob Eastman founded Musician's Friend in 1980 in San Diego, though the current business began to take shape two years later when it was based in a barn in Eagle Point. Musician's Friend has grown rapidly in recent years and was debating how to continue that growth, Eastman said. Owners were weighing whether to become a big retail player and compete with companies like Guitar Center or to take on a partner. "They've been courting us for two years," Eastman said of Guitar Center. "It came to a point where we had overlapping markets. It was time to decide whether we want to go it alone or join forces." Eastman said he felt there would be only two or three big players in the industry in the long run, so merging would be the smartest, safest choice. "This move takes us into the position where we are teaming up with one of the dominant ones," he said. "It really brings a lot of potential to the forefront." Eastman will remain chief executive and the mail-order and Internet portion of the company will continue to be based in Medford. He will join Guitar Center's board of directors and report to Larry Thomas, Guitar Center's chairman and co-chief executive. Thomas said his company wanted to become a leader in mail order and Internet sales and will benefit from Musician's Friend's position in those fields. Seven of Musician's Friend's nine retail stores will be converted to Guitar Centers, but those in Medford and Eugene will retain the Musician's Friend name. Guitar Center has 52 superstores in 26 large cities across the country. The seven Musician's Friend stores that it will take over are also in larger markets. The two companies both have stores in the Seattle area and Denver but will simply have multiple locations in those markets. Guitar Center does plan to expand to smaller cities with up to 150 stores and will study Musician's Friend's operations in Medford and Eugene to refine its plans for smaller stores. Today's Business Index Mail Tribune Copyright � The Mail Tribune 1999, Medford, Oregon USA