The board of Richmond-based Circuit City Stores Inc., the struggling electronics retailer, yesterday rejected a $3.25 billion cash takeover bid from a Boston hedge fund, saying a sale "would not be in the best interest" of the company.
The board, in a statement, said the chain would stick with its own four-year-old revitalization plan, which calls for the relocation of aging Circuit City stores to newer shopping centers and the expansion of video game and DVD offerings, which have lagged behind those of competitors such as Best Buy.
Highfields Capital Management LP, a hedge fund that controls about 7 percent of Circuit City's stock, offered $17 a share for the chain in February. The fund's managers said they hoped to take the chain private to pursue bold turnaround strategies without meeting short-term financial expectations on Wall Street. The stock closed 13 cents higher yesterday at $16.25.
"We're disappointed they won't sell to us," Highfields Capital manager Jonathon S. Jacobson said in an interview last night. "We think there is a lot of value in this company," he said, adding that he and his partner at Highfields, Richard L. Grubman, would continue to lobby Circuit City's management for changes.
Highfields, known for its shareholder activism, is a relative newcomer to the world of takeovers, prompting some analysts to suggest the fund wanted to draw Circuit City into a bidding war -- a claim Highfields denied.
Nevertheless, Circuit City's board appeared to wave off future buyers, saying it had "determined that further exploring the transaction proposed by Highfields or other sale alternatives would not be in the best interests of the company's shareholders."
Since Highfields made its offer, Circuit City has announced several changes, closing 19 stores, five regional offices and a distribution center. In addition, the company's chief operating officer stepped down and Circuit City terminated its contract with Internet seller Amazon.com Inc.
"We are committed to continuing to unlock shareholder value in Circuit City," chief executive W. Alan McCollough said last night.