By Erik Gruenwedel | Posted: 13 Jan 2009
Bankrupt Circuit City Stores Jan. 13 began accepting auction bids for a myriad of assets, including inventory, Web operations, leases, property and the in-home Firedog service, among other items.
Wal-Mart reportedly is among six bidders interested in the Richmond, Va.-based chain’s assets slated to go on the block Jan. 14. Circuit City’s revolving line of credit is set to expire Jan. 16.
The two-day bidding process, disclosed in a filing with the U.S. Bankruptcy Court in Richmond, began as the No. 2 consumer electronics retailer said it was still considering acquisition offers from third parties in addition to financing alternatives.
Tom Arnold, professor of finance at the University of Richmond and longtime observer of Circuit City’s operations, said he believes the potential buyers are former Hollywood Video CEO Mark Wattles with private equity backing or Mexican billionaire Ricardo Salinas Pliego.
“I suspect the whole firm will be bought, but there is potential to split the U.S. and Canadian operations,” Arnold said. “That may not happen in the auction, but could happen shortly after the purchase to raise cash.”
Arnold said that with the Jan. 16 deadline, Circuit City would likely be sold as a complete entity.
“If a sale was not likely, I don't see why Circuit City would have decided to go with the auction strategy because of the risk of liquidation,” he said.
Salinas last year sparked interest in Circuit City assets after acquiring 28% of its shares around the time of the bankruptcy filing. His business interests include TV Azteca and the Grupo Elektra retail company, which operates electronics, furniture and general stores in Mexico.
Previously, activist retail investor Wattles helped land James Marcum to the board. He was subsequently named CEO.
Circuit City last week said two interested parties were close to making an offer for the company that included possibly providing additional financing to sustain operations, restructuring through a standalone plan and/or purchasing the company or select assets.
It marked the second time since last May that outside parties have expressed interest and proceeded with due diligence of Circuit City’s finances. Last year Blockbuster Inc. initiated a $1 billion acquisition offer for Circuit City, which the Dallas-based No. 1 DVD rental subsequently withdrew, citing market conditions.
Circuit City, which operates 565 stores in the United States, posted losses for seven of the last eight quarters and filed for Chapter 11 bankruptcy protection last November, citing $3.4 billion in assets and $2.32 billion in liabilities.