Best Buy ( BBY) has sold off its money-losing Musicland division to a private investment group.

Sun Capital Partners acquired all of Musicland's outstanding shares. In exchange, the firm agreed to assume all of Musicland's liabilities, including lease obligations.

Sun Capital did not pay any cash for Musicland; however, the firm did agree to purchase support services for Musicland from Best Buy for the next year. Best Buy sold Sun Capital all of Musicland's operating assets, except for a distribution center in Indiana that the entertainment retailer will continue to operate.

Best Buy acquired Musicland in January 2001 for about $700 million, which included the assumption of $270 million in long-term debt. The music and movies retailer was meant to help Best Buy expand its operations and attract younger customers.

Instead, Musicland helped drag down Best Buy's performance. In Best Buy's just-completed quarter, the company estimated that Musicland's sales fell 22% from the same period a year ago. On a same-store basis, which compares like outlets open for more than one year, Musicland's sales fell about 15.6%.

After closing about 160 Musicland stores in its last fiscal year, Best Buy shuttered another 61 in the first quarter. At the end of the quarter, Musicland operated about 1,137 stores under the Media Play, Sam Goody and Suncoast brands.

Best Buy announced in March that it planned to sell off Musicland.

Shares of Minneapolis-based Best Buy closed up $2.23, or 5.34%, to $43.99. The company is slated to report its first-quarter earnings on Wednesday.

Based in Boca Raton, Fla., Sun Capital has stakes in Bruegger's Bagels and Nationwide Mattress & Furniture Warehouse.

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