The Sith
July 2nd, 2008, 03:59 PM
Blockbuster withdraws bid for Circuit City
08:27 AM CDT on Wednesday, July 2, 2008
By MARIA HALKIAS / The Dallas Morning News
Blockbuster Inc. said Tuesday it has withdrawn its proposal to acquire Circuit City Inc. as market conditions have worsened since the idea was first hatched in April.
The Dallas-based movie rental chain, with aspirations of becoming a one-stop home entertainment provider, believed it could speed up that goal by merging with the Richmond, Va.-based consumer electronics chain.
Blockbuster Inc2.889:39:45 AM ET+0.37http://dallasnews.stockgroup.com/charts/newchart.asp?P1=BBI&P2=7&P3=2&P4=2008&P5=7&P6=2&P7=2008&P8=6&p9=&P29=FFFFFF&P25=180&P25b=100&P25c=0&P32=000000&P33=003C77&P33a=000000&p34=&P47=FFFFFF&P39=31639C&P48=0&P57=0&p61=0&p62=0 (http://dallasnews.stockgroup.com/sn_overview.asp?ticker=BBI)Previous close: 2.51
Circuit City Stores Inc2.179:39:51 AM ET-0.38http://dallasnews.stockgroup.com/charts/newchart.asp?P1=CC&P2=7&P3=2&P4=2008&P5=7&P6=2&P7=2008&P8=6&p9=&P29=FFFFFF&P25=180&P25b=100&P25c=0&P32=000000&P33=003C77&P33a=000000&p34=&P47=FFFFFF&P39=31639C&P48=0&P57=0&p61=0&p62=0 (http://dallasnews.stockgroup.com/sn_overview.asp?ticker=CC)Previous close: 2.55
But Circuit City's deteriorating performance and cash position and Blockbuster's shrinking stock price made its $6-a-share bid ill-advised in the view of many analysts.
Following the completion of a review of Circuit City's books, Blockbuster chairman and chief executive Jim Keyes said it isn't in the best interest of shareholders to proceed with the acquisition.
"We continue to believe in the strategic merits of a consumer retail proposition that would bring media content and electronic devices together under one brand," Mr. Keyes said.
He said Blockbuster will pursue the strategy on its own. The company has added consumer electronics merchandise to several test stores in the Dallas area.
Circuit City confirmed shareholder Mark Wattles' statement last week that others are interested in bidding for the chain.
Philip Schoonover, chairman, president and chief executive, said Circuit City's review of its options wasn't "dependent on Blockbuster's participation."
Circuit City has been squeezed as chief rival Best Buy Co. strengthens its market share and Wal-Mart Stores Inc. aggressively expands its consumer electronics business.
Last month, Circuit City reported a first-quarter loss of $1 a share, a 12.2 percent decline in same-store sales and a deteriorating cash position.
Investors voted "with their feet," said Arvind Bhatia of Sterne, Agee & Leach in Dallas, sending Blockbuster's stock price down to 52-week lows since the bid was announced.
As Circuit City's market valuation has fallen, a deal may make more sense for private equity investors, Mr. Bhatia said.
08:27 AM CDT on Wednesday, July 2, 2008
By MARIA HALKIAS / The Dallas Morning News
Blockbuster Inc. said Tuesday it has withdrawn its proposal to acquire Circuit City Inc. as market conditions have worsened since the idea was first hatched in April.
The Dallas-based movie rental chain, with aspirations of becoming a one-stop home entertainment provider, believed it could speed up that goal by merging with the Richmond, Va.-based consumer electronics chain.
Blockbuster Inc2.889:39:45 AM ET+0.37http://dallasnews.stockgroup.com/charts/newchart.asp?P1=BBI&P2=7&P3=2&P4=2008&P5=7&P6=2&P7=2008&P8=6&p9=&P29=FFFFFF&P25=180&P25b=100&P25c=0&P32=000000&P33=003C77&P33a=000000&p34=&P47=FFFFFF&P39=31639C&P48=0&P57=0&p61=0&p62=0 (http://dallasnews.stockgroup.com/sn_overview.asp?ticker=BBI)Previous close: 2.51
Circuit City Stores Inc2.179:39:51 AM ET-0.38http://dallasnews.stockgroup.com/charts/newchart.asp?P1=CC&P2=7&P3=2&P4=2008&P5=7&P6=2&P7=2008&P8=6&p9=&P29=FFFFFF&P25=180&P25b=100&P25c=0&P32=000000&P33=003C77&P33a=000000&p34=&P47=FFFFFF&P39=31639C&P48=0&P57=0&p61=0&p62=0 (http://dallasnews.stockgroup.com/sn_overview.asp?ticker=CC)Previous close: 2.55
But Circuit City's deteriorating performance and cash position and Blockbuster's shrinking stock price made its $6-a-share bid ill-advised in the view of many analysts.
Following the completion of a review of Circuit City's books, Blockbuster chairman and chief executive Jim Keyes said it isn't in the best interest of shareholders to proceed with the acquisition.
"We continue to believe in the strategic merits of a consumer retail proposition that would bring media content and electronic devices together under one brand," Mr. Keyes said.
He said Blockbuster will pursue the strategy on its own. The company has added consumer electronics merchandise to several test stores in the Dallas area.
Circuit City confirmed shareholder Mark Wattles' statement last week that others are interested in bidding for the chain.
Philip Schoonover, chairman, president and chief executive, said Circuit City's review of its options wasn't "dependent on Blockbuster's participation."
Circuit City has been squeezed as chief rival Best Buy Co. strengthens its market share and Wal-Mart Stores Inc. aggressively expands its consumer electronics business.
Last month, Circuit City reported a first-quarter loss of $1 a share, a 12.2 percent decline in same-store sales and a deteriorating cash position.
Investors voted "with their feet," said Arvind Bhatia of Sterne, Agee & Leach in Dallas, sending Blockbuster's stock price down to 52-week lows since the bid was announced.
As Circuit City's market valuation has fallen, a deal may make more sense for private equity investors, Mr. Bhatia said.