Blockbuster Calls Off Its Offer for Circuit City
Wednesday, July 2, 2008
Blockbuster yesterday abandoned its efforts to acquire the Richmond-based electronics retailer Circuit City despite financial backing from billionaire investor and board member Carl C. Icahn.
The move comes less than two months after Circuit City reluctantly agreed to open its books to the movie-rental chain. In a statement, Blockbuster said that unfavorable market conditions and a closer review of the deal's finances led it to withdraw the offer. A message left for Icahn was not returned.
"We have determined that it is not in the best interest of Blockbuster's shareholders to proceed with an acquisition of Circuit City," said Jim Keyes, Blockbuster's chief executive.
Circuit City said that it is continuing to explore strategic alternatives and that its review of possible options was not contingent on a deal with Blockbuster. It has not set a deadline for completing that review.
Blockbuster announced its unsolicited offer to buy Circuit City in April for $6 to $8 per share in cash -- for a total of more than $1 billion -- after being denied access to Circuit City's books.
Circuit City eventually relented after Icahn filed a letter with the Securities and Exchange Commission stating that he was ready to purchase the company if Blockbuster could not find funding or win shareholder approval.
Circuit City has been under pressure from activist investor Mark Wattles, who owns a 6.5 percent stake in the company, to put itself on the auction block. Wattles had called Blockbuster's bid "a good starting point," but last week during Circuit City's annual shareholder meeting he said several additional firms were interested in buying the company. Wattles declined to comment for this story.
Blockbuster's announcement came after the markets closed. Circuit City's stock ended yesterday at $2.55, down 34 cents, or about 12 percent. Blockbuster shares were up 1 cent, to $2.51.