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Circuit City Opens Books to Blockbuster, Carl Icahn

9 May, 2008 By: Erik Gruenwedel

Circuit City Stores Inc. May 9 apparently relented to dissident shareholders and said it would allow Blockbuster Inc., including board member Carl Icahn, to review its financials regarding a possible acquisition offer.

Richmond, Va.-based Circuit City agreed to the due diligence agreement after Icahn (Blockbuster's largest individual shareholder) reportedly said he would be willing to personally finance the Dallas-based rental giant's $6-per-share cash offer.

Circuit City retained Goldman Sachs & Co. to advise it on the possible takeover and other strategic alternatives.

"While the Circuit City board has confidence in the company's ability to successfully implement its turnaround plan and generate shareholder value, we believe that we can best serve the interests of our shareholders by exploring all possible alternatives to enhance shareholder value,” CEO Philip Schoonover said in a statement.

Blockbuster CEO Jim Keyes said he was pleased by the decision and reiterated that a combination of the two chains would be provide significant cost savings and revenue opportunities.

Keyes said Blockbuster would only continue with its acquisition bid if the due diligence process reaffirmed the acquisition provided “substantial benefits” to its shareholders.

Schoonover said the agreement should not be construed as an indication its board had completed a review of the Blockbuster proposal or settled upon a particular strategic course of action.

In addition, the No. 2 electronics retailer said it would include three board director nominees from dissident shareholder Mark Wattles' slate at next month's annual shareholder meeting.

Wattles, through his management company, Wattles Capital Management LLC, had submitted a list of board nominees in addition to two business proposals that essentially called for the sale of the company and ouster of Schoonover.

WCM owns 11 million shares, or 6.5%, of Circuit City's common stock.

“I am confident that the Circuit City board and Goldman Sachs are committed to a process that will maximize shareholder value,” Wattles said, in a statement. “As a result, we were able to resolve our differences and will now work to support that process anyway we can.”

Wattles co-founded Hollywood Video and then sold it for $1.2 billion to Movie Gallery Inc. in 2005. He currently owns the 32-store Ultimate Electronics chain in Denver.

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