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No Deal for Circuit City: Blockbuster Withdraws $1.3 Billion Offer

Posted on: Wednesday, 2 July 2008, 09:00 CDT

Circuit City Stores Inc. will not be sold to Blockbuster Inc.

The Dallas-based movie rental chain announced last night it was withdrawing its nearly $1.3 billion offer after reviewing the consumer electronic retailer's finances.

Blockbuster "determined that it is not in the best interest of Blockbuster's shareholders to proceed with an acquisition of Circuit City," said Jim Keyes, the chain's chairman and chief executive

Henrico County-based Circuit City said it was undeterred and would continue to look at it options.

"Our exploration of strategic alternatives is intended to serve the interests of our shareholders by considering every possible alternative to enhance shareholder value," Philip J. Schoonover, Circuit City's chairman, president and chief executive.

Blockbuster, the nation's largest movie rental chain, announced in April that it had offered to buy Circuit City for between $6 and $8 a share for its plan to create a 9,300-store retail empire.

Circuit City's shares closed at $2.55 yesterday on the New York Stock Exchange. The Blockbuster announcement was made after the markets closed.

A year ago tomorrow, Circuit City's shares traded at $15.33.

Blockbuster went public with its offer after its initial overtures were ignored by Circuit City's board. Eventually, Circuit City agreed to open its books to Blockbuster -- and to others.

Circuit City hired Goldman Sachs & Co. in May to help it assess its options.

Billionaire financier Carl Icahn had told Circuit City that if Blockbuster was unable to secure financing, he would buy the electronics chain. Whether Icahn remains in the picture is unknown.

But Mark J. Wattles, president of Wattles Management LLC and one of Circuit City's largest shareholders, said last week that he was aware of at least three companies in the final stages of due diligence -- including Blockbuster.

Wattles said he expected the chain to announce it had a deal in place within a month. He did not return an after-hours call last night.

The news that the deal was off comes nearly two week after the chain reported a net loss of $164.8 million, or $1 a share, for the fiscal first quarter. The loss was about $100 million greater than it had been during the same period last year.

Circuit City also suspended its dividend, disclosed that it burned through nearly $272 million in cash since May 2007, and filed for the possibility to raise more cash by issuing stock.

Source: Richmond Times-Dispatch

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