CDNow Considers Options After Merger Falls Though

CDNow Inc., an online seller of compact discs and videos, said it has hired investment bank Allen & Co. to explore alternatives including a possible sale of the company after its merger with Columbia House was called off. Shares of CDNow have lost almost 60% of their value since the merger with Columbia House was announced July 13. Time Warner Inc. and Sony Corp., which jointly own Columbia House, each would have owned 37% of the merged company and CDNow would have owned 26%. Fort Washington, Pa.-based CDNow said the companies were abandoning the merger in favor of a $51-million investment in CDNow by the two media giants, including $21 million in cash for equity. Time Warner and Sony also will pursue strategic relationships with CDNow. CDNow.com was the top online retailer in February with more than a million purchasers and a 28% increase in traffic, according to PC Data Online. Amazon.com Inc. had topped PC Data’s list since it began last year. CDNow shares fell $1.44 to close at $8 on Nasdaq.