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SAN FRANCISCO—Best Buy Co. said Monday that it has signed a deal to acquire digital music provider Napster Inc. for $54 million, giving the retailer a means of taking on Wal-Mart in the increasingly important online-distribution channel.


Under the deal, Best Buy will pay Napster for $2.65 a share in cash, a premium of 95 percent over the value of the stock at the end of last week. The retailer also is paying about $67 million for cash and short-term investments on Napster’s balance sheet as of June 30.


The deal will give Best Buy an online digital music retail outlet as well as a subscription streaming service that has about 700,000 subscribers. That could help Best Buy to compete against retail giant Wal-Mart, which has its own online digital music offering.


“This transaction offers Best Buy a recognized platform for enhancing our capabilities in the digital media space and building new, recurring relationships with customers,” Brian Dunn, Best Buy’s president and chief operating officer, said in a statement.


“Over time we hope to strengthen our offerings to consumers, who we believe will increasingly seek devices and solutions that enable them to access their content wherever, whenever and however they want.”


In Monday trading, shares of Napster jumped $1.17 to $2.53. Best Buy shares dipped 79 cents to $43.70.


The deal has already been approved by Napster’s board of directors. Best Buy said it expects to close the deal in the fourth quarter.

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