Actually the CC market cap is 837 Million and their stock closed at at $4.97 today. So $1B to 1.3B ($6 to $8 per share) is a substantial premium over their current worth.
Now their 52 week high was $19/share last April. Meaning their stock price has really tanked, partly due to bad performance, partly part of the overall market downswing.
The actually lost money rather then turned a profit in their last fiscal year, which ended March 1st of this year.
Here's a graph of their stock price over the last year:
CC: Basic Chart for CIRCUIT CITY STRS - Yahoo! Finance
So you tell me, can Blockbuster, themselves in a problematic situation and barely surviving, turn around Circuit City AND themselves?
I'm not so sure....
By the way, in the situation that Blockbuster is, I'm betting they may not be able to afford the purchase to begin with. Looks like a desperate move to me...