Goldman Sachs Doubts Blockbuster's Circuit City Bid23 Apr, 2008 By: Erik Gruenwedel
Circuit City Stores Inc. April 23 said its financial advisor, Goldman, Sachs & Co., doesn't believe Blockbuster Inc. has the ability to fund its proposed $1.35 billion unsolicited acquisition of the No. 2 consumer electronics retail chain.
Blockbuster last week made public its $1.35 billion cash offer for Circuit City after the Richmond, Va.-based consumer electronics retailer failed to grant it access to due diligence information and commence good-faith negotiations.
Richmond, Va.-based Circuit City was responding to a letter sent the same day to its board by dissident shareholder Mark Wattles urging it to open its books to Blockbuster for further due diligence.
“[Goldman Sachs] has advised the company that it believes that Blockbuster cannot in fact consummate the proposed transaction in light of the difficult current financing environment,” said Circuit City in a statement.
Wattles said he is asking the Circuit City board to make available its finances to Blockbuster, in addition to seeking third-party suitors.
Wattles, co-founder and former CEO of Hollywood Video, sent the letter via his investment company Wattles Capital Management LLC. He said Blockbuster posed no competitive threat to Circuit City and that the DVD rental company's board member and shareholder Carl Icahn appeared willing to help back the deal financially.
Wattles, who sold Hollywood Video to Movie Gallery for $1.25 billion in 2005, owns a 6.5% stake in Circuit City. He has submitted a slate of board nominees for election at the annual shareholders meeting in addition to calling for the resignation of CEO Philippe Schoonover.
Circuit City and top executive Philippe Schoonover have been under pressure to stymie ongoing losses exacerbated by the comparative success of rival Best Buy Co. Inc.
Schoonover insists the company is in turnaround.