Blockbuster Drops Circuit City Bid1 Jul, 2008 By: Erik Gruenwedel
Citing adverse market conditions, Blockbuster Inc. July 1 formally rescinded its two-month-old $1.32 billion offer to acquire consumer electronics retailer Circuit City Stores Inc.
Blockbuster chairman and CEO Jim Keyes said completion of the initial due diligence process determined that it was not in the best interest of Blockbuster's shareholders to proceed with an acquisition of Circuit City.
"We continue to believe in the strategic merits of a consumer retail proposition that would bring media content and electronic devices together under one brand,” Keyes said, in a statement. “We will pursue this strategy through our Blockbuster stores as a way to diversify the business and better serve the entertainment retail segment."
Many analysts had criticized Blockbuster for the proposed acquisition, with some calling it one of the most ill conceived mergers in history.
Dallas-based Blockbuster is aggressively expanding beyond traditional DVD rental with the sales of DVD movies, video games, digital downloads, food, coffee and entertainment hardware, including Blu-ray players.
Philip Schoonover, chairman, president and CEO of Circuit City, downplayed Blockbuster's decision saying ongoing “exploration of strategic alternatives” by the board was intended to enhance shareholder value.
“The board's review was not dependent on Blockbuster's participation,” Schoonover said. “We are diligently working with the parties involved in the process, and intend to continue our thorough approach until such point as the board determines upon a particular strategic course of action.”
Dissident shareholder Mark Wattles last week said multiple parties were interested in the Richmond, Va.-based No. 2 CE retailer.
Schoonover said the board had not established a deadline for completing the review.