Blockbuster bids up to $1.35 billion for Circuit City
Blockbuster Inc, the biggest movie-rental chain, made an unsolicited offer to buy Circuit City Stores Inc, for as much as $1.35 billion as the second- largest US electronics retailer struggles with falling sales.
Blockbuster, based in Dallas, wrote to Circuit City Chief Executive Officer Philip Schoonover and bid between $6 and $8 a share for the company, as much as double last week's closing price. Blockbuster said Richmond, Virginia-based Circuit City hasn't given access to its books.
The offer comes six weeks after Circuit City investor Mark Wattles said he wanted Schoonover ousted and a buyer found. The company posted five quarterly losses before returning to profit in the fourth quarter by firing higher-paid workers. Blockbuster CEO Jim Keyes said yesterday that a merger would save money and combine expertise in media content and electronic devices.
"It's an odd move," Nick Bubb, a retail analyst at Pali International in London, said by phone. "Synergies between a video store and an electronics store aren't that obvious."
A message left for Circuit City spokesman Bill Cimino before US business hours wasn't immediately returned.
"The combination of the two companies would result in an $18 billion global retail enterprise uniquely positioned to capitalize on the growing convergence of media content and electronic devices," Blockbuster said in the statement.
Circuit City has 693 stores in the US and 779 shops and dealer outlets in Canada. Schoonover has opened smaller stores and reduced staff as same-store sales decline and it loses clients to Best Buy Co, the biggest electronics chain. Revenue and earnings are suffering because new employees are struggling to sell service packages and warranties, among the most profitable items electronics retailers offer.
"Clearly Circuit City itself is in pretty poor shape," Pali's Bubb said. Blockbuster is in "a much stronger position".
Circuit City closed at $3.90 last week, giving the company a market value of $657 million. The shares have tumbled 80 percent over the past year.
Before 2007, Blockbuster lost money in nine of the past 10 years as people switched from renting videos at stores. Blockbuster is cutting marketing costs and shedding unprofitable customers to return to profit. It's also sold more DVDs and raised prices on its Total Access online plan, designed to compete with Netflix Inc in Internet rentals.
"At Blockbuster, we have successfully deployed a series of strategic initiatives designed to provide our customers with convenient access to media content," Keyes said in the statement.
Agencies
(China Daily 04/15/2008 page17)
