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GC Buys Hermes Stores

Guitar Center has signed a definitive agreement to acquire certain assets of Hermes Trading Co., a Texas-based musical instruments distributor and retailer. The acquisition includes four retail locations: San Antonio, McAllen, Laredo and Brownsville.

As part of the transaction, Guitar Center will purchase the existing inventory of musical instruments and equipment for the four locations. The stores will be remodeled and rebranded into Guitar Center stores.

The transaction will be funded through Guitar Center's available cash and credit. The acquisition is subject to customary terms and conditions and may be adjusted when the final inventory value is determined. The closing is expected to occur in the second quarter, and the acquisition will offset other Guitar Center store openings for 2006.

"We are excited about the acquisition of these four Hermes Music stores, which cater largely to the Hispanic market," said Marty Albertson, chairman and CEO of Guitar Center. "This transaction will enable us to strengthen our service to this important customer base. We currently have 12 Guitar Center stores in Texas, including our El Paso store, which we opened last year, and the conversion of these stores to the Guitar Center brand will expand our presence across the state. In particular, we will introduce the Guitar Center brand in San Antonio, one of the top retail markets in Texas."

Hermes Music has been a musical instruments distributor and retailer since 1982, with sales in the United States, Mexico and South America. Hermes Music will continue to operate its distribution business and sales to customers outside the United States.

Alberto Kreimerman, founder of Hermes Music, will focus his time and efforts helping support underprivileged Hispanic children in the United States and Mexico through the Hermes Music Foundation, Proyecto de Amor and the television program that supports both projects. Guitar Center anticipates assisting Kreimerman in these efforts.,