RSSCircuit City to open its books to Blockbuster, Icahn
By Ed Oswald | Published May 9, 2008, 5:23 PM
Retailer Circuit City has secured Goldman Sachs to advise it on its future moves and confirmed it had received information on how a buyout by Blockbuster would be financed.
Circuit City said it will consider all proposals, although it stressed it had not come to a decision on any single alternative. Furthermore, the company will no longer comment on any future moves until the board approves a particular plan.
Blockbuster in mid-April offered to purchase Circuit City in a deal worth about $6-8 per share, or around $1.3 billion. The retailer responded that it wanted to talk, but would not open its books over concerns about financing.
From Friday's comments, it appears those fears have been allayed. In addition, billionaire activist investor Carl Icahn added in a letter to Circuit City that he and his associates are ready to make a bid for the company if Blockbuster cannot raise the cash.
"Let me be clear that our decision to allow Blockbuster and Carl Icahn to conduct due diligence should not be taken as an indication that the board has completed its review of the Blockbuster proposal, that the board has taken a position on the company's value or that it has settled upon a particular strategic course of action," the retailers CEO Philip Schoonover said in a statement.
Blockbuster believes that a combined company would be "uniquely positioned" to take advantage of the growing strength of digital content.
"Both companies would benefit from complementary products, marketing, management strengths, technology and distribution and the resulting synergies would significantly improve consolidated financial performance," Blockbuster's CEO Jim Keyes has said previously.
However, the biggest concerns remain the financing, and Blockbuster has had its share of difficulties in that department. Following a battle with Netflix over online rentals that it ultimately retreated from, there's not much financial wiggle room for the company.
That's not stopping Blockbuster. "We are committed to only doing a transaction that provides substantial benefits for our shareholders," it said in a statement on Friday.
Netflix is set to make Blockbuster a thing of the past, and Best Buy has priced Circuit City practically out of existence. Combining both companies may delay the inevitable, however the inevitable still remains: extinction.
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|Two companies circling the drain getting together. This is a great idea.
CC stores feel uncomfortable from the second you walk in. I can't believe no one has figured that out yet. BB got it right with it's open atrium style design with natural light coming in.
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|Blockbuster and Circuit City. It's an odd couple but it could work. Lets say Blockbuster put it's store inside Circuit City. Now you have customers that were just planning on renting a movie, see something nice and buy an Ipod. Or vice versa.
I still think online rental and streaming movies is the way to go, and Netflix leading in that area.
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|It would be much better to have a store similar to Magnolia Hifi inside Circuit City stores like what Best Buy is currently doing. Circuit City needs to focus more on selling high quality home theater hardware (such as speakers and receivers). The stuff Circuit City has now is cheap low end crap. If I'm going to rent movies then I want to be able to watch them on my schedule instead of having a one to five day period to watch them before I start getting charged late fees.
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