Atari plans to acquire Federated Group chain

SUNNYVALE, Calif. Atari Corp., the personal computer and videogame producer, said Monday it will make a move into electronicsretailing by acquiring Federated Group Inc. in a deal worth about $67million.

Federated Group, based in City of Commerce, Calif., operates 67stores in California, Texas, Arizona, New Mexico and Kansas.

The chairman of Federated, Wilfred Schwartz, said its purchaseby Atari means expansion for the retailer.

"Our aspiration is to become a national retailer. Atari bringsnot only a national, but a global perspective to our business," hetold Reuters.

The move into retailing marks a dramatic change for Atari, whichhas found recent success with a new line of high-powered personalcomputers introduced by new owners led by former CommodoreInternational Ltd. chief Jack Tramiel. He is known in the industryas a cost-slasher who produces low-priced computers but not as astore operator.

"Mr. Tramiel is known for his skills in electronics . . . andI'm sure he's going to put the same energy into this new venture,"Schwartz said.

Federated sells Atari products now and Schwartz foreseesincreased marketing efforts on behalf of Atari. "If Atari is my papayou can assume there will be a good presentation of Atari products,"he said.

Tramiel's group bought the assets of Atari in 1984 after itsprevious owner, Warner Communications Inc., racked up big losses asthe computer video game business went sour and its pioneering homecomputers lost favor to more versatile models.

Personal computer sales account for about 10 percent ofFederated's sales. Atari did not say how it would incorporate itscomputer business with the Federated stores and company officialscould not be reached for comment.

Federated markets home entertainment products, deriving 28percent of its revenues from video playback equipment. Audio systemscontribute about 21 percent of sales, television and TV-relatedproducts some 14 percent.

The money-losing Federated property will represent anotherchallenge for Tramiel, a hard-driving executive who made Commodoreinto the biggest and most profitable maker of cheaper home computersbefore he left to launch his own company.

Federated had a loss of $895,000 in its first fiscal quarterended May 31 on sales of $91.1 million.

Although a partnership led by Schwartz has agreed to tender its55 percent stake in Federated, Schwartz will remain chairman of thefirm. He said current personnel will stay in force.

Atari said it will offer to buy remaining shares at the sameprice of $6.25 a share. Federated stock on the over-the-countermarket Monday was quoted at $6.12 1/2.

Atari, whose stock fell 75 cents on the American Stock Exchangeto $13.50 after the announcement, said the offer is subject to theapproval of Federated's lenders.

Federated has about 10.8 million shares outstanding.

Under the terms of the agreement, Atari will start its tender onor before Friday.

Atari earned $15.3 million in this year's first fiscal quarter,an impressive improvement over the $2.7 million earned in thecorresponding year-ago period.