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 The movie rental chain operator said it has been in talks with Richmond, Va.-based Circuit City for months regarding an acquisition, and on Feb. 17th sent a letter to Circuit City Chairman and Chief Executive Philip Schoonover offering $6 to $8 per share in cash for the company.
Based on Circuit City's 168.4 million shares outstanding at Dec. 31, 2007, the deal values Circuit City at $1.01 billion to $1.35 billion. The offer also represents a 25 percent to 67 percent premium to Circuit City's closing stock price of $4.79 on Feb. 15th, the last trading day before Blockbuster made its offer, and at least a 54 percent premium to the stock's closing stock price Friday of $3.90.
Blockbuster also said in its February letter it is willing to pursue alternative deal structures which would enable Circuit City shareholders to receive stock. The company would expect to fund the takeover with borrowings and issuance of additional stock through a rights offering to existing shareholders.
Blockbuster says that it requested a response by Feb. 21, but, to date, Circuit City has failed to provide due diligence necessary to allow Blockbuster to make a definitive takeover proposal. Blockbuster is asking for such information as Circuit City's long-term corporate strategic plan and outlook, detailed store-level performance data and current inventory aging schedules, among other items.
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 "Our proposal offers Circuit City a significant premium to its existing stock price and creates a game-changing retail concept with a sustainable competitive advantage," Blockbuster Chairman and Chief Executive Jim Keyes said in a statement. "We look forward to engaging in further conversations with Circuit City and reaching an agreement as soon as possible."
Circuit City shares have declined steadily from a year-ago high of $19.12 to reach a low of $3.44 last month. The struggling electronics retailer, the nation's second-largest, did swing a profit for its fiscal fourth quarter, due to cost-cutting efforts, its first since the second quarter of 2007.
Circuit City is facing pressure from activist shareholder Wattles Capital Management who seeks improved profitability, and the ousting of Schoonover and the board.
[Associated Press; Jennifer
Malloy]
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