Blockbuster Offers $1B For Circuit City

[{OF}MadD!]

Blockbuster has offered to buy CE retail giant Circuit City for about $1 billion to $1.3 billion in cash.

That's according to an article by Reuters.

The video rental company says it made the offer in February in a letter to Circuit City CEO Philip Schoonover.

But thus far, Blockbuster says Circuit City has failed to provide "due diligence," corporate speak for agreeing to begin considering the proposal.

Blockbuster's unsolicited bid for Circuit City could signal the company is moving towards a new direction. Concerned by new emerging services such as Video on Demand and digital downloads, the retailer could be shifting focus to selling TV-related hardware and software rather than relying on video rentals.

The company recently announced that it's expanding the number of stores that will both sell and rent Blu-ray high-def discs, a new category that will compete with VOD and downloads.

Blockbuster CEO Jim Keyes said the Blockbuster-Circuit City joining would create "the most convenient source for media entertainment."

Circuit City has been rumored as a takeover target for months due to declining profits.

[Cheese]

1B seems like chump change for a worldwide retailer...even if they arn't making much money. just one of their stores in a city would cost a couple hundred thousand to build, doesn't take long to add up to 1B that way lol

[{OF}Malicious Assault]

Then add merchandise the the building costs and that will tell you why CC never called back They thought it was a Joke

[{OF}Flying_Dutchman]

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...