Government // Mobile & Wireless
News
4/14/2008
06:31 PM
50%
50%

Blockbuster Offers $1.35 Billion For Skeptical Circuit City

Billionaire investor Carl Icahn said he would assist in backing Blockbuster in its quest to pick up the electronics and computer retailer.

Video rental/retailer Blockbuster has made an unsolicited offer of $1.35 billion for Circuit City Stores in a hopeful deal that the two unprofitable companies can combine to produce a profit.

Initial fears that Blockbuster couldn't finance the acquisition were allayed somewhat by the fact that a Blockbuster stockholder, billionaire investor Carl Icahn, said he would assist in backing Blockbuster in its quest to pick up the electronics and computer retailer. Icahn, fresh from a victory in his battle to gain representation on Motorola's board, is also pressing a proxy fight with Circuit City.

Even so, Circuit City has questioned Blockbuster's ability to raise the cash to takeover Circuit City.

Both companies have been under pressure in recent months. Circuit City has been caught in the same downdraft that has pulled down other big-box retailers like CompUSA and Best Buy, while Blockbuster has been hit with stiff competition from Netflix and looming competition for video streaming from Apple's iTunes service.

Last year, Circuit City gambled that layoffs of its top sales and support staff would translate to an improved bottom profit line, but the move failed to boost profits.

Blockbuster revealed that it had made a $6- to $8-a-share offer in February to acquire Circuit City. After claiming that Circuit City declined to open its books, Blockbuster went public with its offer, Blockbuster noted.

In its letter, Blockbuster said a merger of the two companies would be beneficial to both. "The combination of Blockbuster and Circuit City will result in an $18 billion retail enterprise uniquely positioned for the convergence of media content and electronic devices. We would seek to differentiate products in both Blockbuster and Circuit City stores by offering exclusive content and content-enabled devices," Blockbuster wrote.

Circuit City answered that it has doubts about Blockbuster's ability to finance an acquisition properly, stating: "Blockbuster has been unable to satisfy Circuit City and its advisors that Blockbuster's proposal could be financed."

Comment  | 
Print  | 
More Insights
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest, Dec. 9, 2014
Apps will make or break the tablet as a work device, but don't shortchange critical factors related to hardware, security, peripherals, and integration.
Video
Slideshows
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
Join us for a roundup of the top stories on InformationWeek.com for the week of December 14, 2014. Be here for the show and for the incredible Friday Afternoon Conversation that runs beside the program.
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.