Blockbuster makes play for Circuit City
EmptyNEW YORK -- Video rental giant Blockbuster Inc. has made an unsolicited offer to buy Circuit City for at least $6 per share, or $1 billion, in cash, a 54% premium over the consumer electronic retailer's closing stock price of $3.90 on Friday.
The deal would create an $18 billion global retail giant.
Blockbuster took the offer public in the early Monday morning hours, saying it had sent an offer letter to Circuit City in mid-February, but hasn't been given the opportunity to conduct the necessary due diligence. It added that such due diligence could move it to offer as much as $8 per share for Circuit City.
At a time of a sluggish U.S. economy and a lack of cheap financing for private equity-led buyouts, strategic buyers could well step up attempts to buy up more-affected peers on the cheap.
Blockbuster highlighted that the combined company would be "uniquely positioned to capitalize on the growing convergence of media content and electronic devices." It would also benefit from the revenue growth generated by their complementary products and cost savings, it added.
"Our proposal offers Circuit City a significant premium to its existing stock price and creates a game-changing retail concept with a sustainable competitive advantage," Blockbuster chairman and CEO Jim Keyes said. "The combination will result in a compelling consumer proposition that will drive significant revenue and margin enhancements as well as cost synergies."
Keyes also said Blockbuster expects to report a first-quarter profit of $30 million, compared with a loss of $49 million in the year-ago period, arguing that this is testimony to his firm's recent turnaround.
Blockbuster management discussed the proposal in a conference call Monday morning.