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Circuit City questions Blockbuster takeover finances

updated 04:30 pm EDT, Thu April 24, 2008

Circuit City questions bid

Last week saw video and game rental chain Blockbuster make a public $1 billion bid for electronics retailer Circuit City. At that time, Blockbuster accused Circuit City of not providing information the suitor requested to make a definitive proposal. Yesterday, investor group Wattles Capital Management, representing Blockbuster, sent a letter outlining the reasons for such disclosure to Blockbuster's board members. Circuit City's same-day response questioned Blockbuster's ability to finance such a deal in light of the rough economy.

Circuit City, working with its financial advisor, Goldman, Sachs & Co, believes the limited information it has are the reasons for its doubts. The retail chain's board members concluded they will require Blockbuster to produce a realistic financing outline before they would release any more information Blockbuster requested.

Blockbuster, on the other hand, is maintaining it needs its answers before it can provide those very same transaction financing questions to Circuit City, among other reasons.

The offer would provide $6 per share and equate to $1 billion, or approximately 54 percent more than Circuit City's current value. The Wattles letter also requested a rapid start of good-faith negotiations, so that it could make a "definitive proposal at the high end of their offer's range." The information it seeks could increase the offer to as much as $8 per share, or about $1.3 billion. Wattles holds a 6.5 percent stake in Circuit City.

Combined, the companies are estimated to be worth approximately $18 billion. Industry analysts believe the move is the first step in the two offering a similar hardware/download enterprise to Apple's successful iPod/iTunes operation. Blockbuster would likely take many of its movie offerings online, and possibly add music to the mix, which users could enjoy on their TVs or other devices bought from the same company.



By Electronista Staff
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  1. climacs

    Forum Regular

    Joined: Sep 2001

    0

    good luck with that

    Blockbuster + Circuit City? It's like the anti-iTunes as far as customer goodwill.

  1. climacs

    Forum Regular

    Joined: Sep 2001

    0

    an idea only an MBA

    could have thought was a really good idea.

    "Industry analysts believe the move is the first step in the two offering a similar hardware/download enterprise to Apple's successful iPod/iTunes operation. Blockbuster would likely take many of its movie offerings online, and possibly add music to the mix, which users could enjoy on their TVs or other devices bought from the same company."

    Really? For reals? They're going to sell their own MP3 player? I hope that's not what they mean. I think they mean, you'd buy any old MP3 player from Circuit S***** and then go to Ballbuster Music Store to buy/rent films, TV shows and music.

    I can't imagine any worse combination of retailers than Circuit S***** and Ballbuster. CC is known for overcharging and unknowledgable sales associates who try to up-sell you on c*** that earns them spiffs but doesn't fill your needs; Ballbuster is still hated for their predatory late fees policy, which made Wall Street happy but generated long-lasting customer ill will. BB is also the McDonald's of movie rentals, catering only to the mass market lowest-common-denominator.

    Good luck with that, BB, if you succeed. Not only do you have to remake yourselves to get people to forget how crappy both you and CC are, but you also have to execute your hardware/software strategy flawlessly to have any hope of only staying several steps behind iTMS.

    Still, I guess BB has to do something because there's no future for their chain of bricks-and-mortar rental stores. I just don't think this is the answer, not even close. It's like some MBA said, "hey - let's imitate iTMS because that worked so well for Apple. We'll just build a Frankenstein monster out of the parts of BB and CC! What could possibly go wrong???!"

  1. UberFu

    Fresh-Faced Recruit

    Joined: Oct 2002

    0

    circuit city in my town..

    ,,,,sucks! It's old and hasn't been updated since they opened the store_ Starting to look run down_

    Also -- climacs --

    "CC is known for overcharging and unknowledgable sales associates who try to up-sell you on c*** that earns them spiffs but doesn't fill your needs;"

    Bestbuy does the same thing_ CompUSA when it was around did it as well_ Even Apple Stores fit that bill - as the Apple Experts in them have slightly more knowledge than those folks as the other shops about computers - but it still isn't saying much_

  1. climacs

    Forum Regular

    Joined: Sep 2001

    -1

    Worst Buy

    oh I completely agree re: overcharging and hard-selling s*** you don't need, uberfu... but I didn't mention them because they're not the subject of this proposed merger.

    The last time I ever set foot in a Worst Buy was when they tried to pull that exact s*** on me - sell me something which would not work with my computer, and I knew it, and the sales guy tried to BS me into buying it anyway. I think the only time I was there since then was when I really, really needed an ink cartridge right away and my Fry's Electronics is too far away to justify driving there just to save a buck fifty on a single ink cartridge.

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