An offer of between $6 and $8 per share in cash was presented in a letter to Philip Schoonover, chairman-CEO of the beleaguered Circuit City chain on Feb. 17, with the unanimous approval of Blockbuster's board of directors. Blockbuster made the offer public after Circuit City failed to provide items needed for Blockbuster to complete its due diligence.
"Our proposal offers Circuit City a significant premium to its existing stock price and creates a game-changing retail concept with a sustainable competitive advantage," Jim Keyes, Blockbuster chairman-CEO, said in a statement. "We believe the combination will result in a compelling consumer proposition."
While that proposition isn't readily apparent, in a statement Blockbuster argues, "The combination of the two companies would result in an $18 billion global retail enterprise uniquely positioned to capitalize on the growing convergence of media content and electronic devices. The transaction would allow both companies to benefit from the revenue growth generated by their complementary products."
Circuit City today acknowledged the proposal and said it "will continue to carefully consider and evaluate" the unsolicited offer. However, it raised concerns about whether Blockbuster, which had about $185 million in cash as of last quarter, would be able to finance the deal. It also urged shareholders not to take action.
"Circuit City is unwilling to provide Blockbuster with additional, detailed due-diligence information and embark on a highly conditional undertaking until these questions are answered satisfactorily," the electronics retailer said in a statement.
The proposal is just the latest chapter in what has been a tumultuous period for the struggling electronics retailer. Most recently, investor Wattles Capital Management has begun calling for the ouster of Mr. Schoonover. And there have been a string of high-profile executive departures, including that of CMO Peter Weedfald in March.
After splitting with independent Doner last year, Blockbuster has opted to go without an agency of record. Euro RSCG Worldwide, Chicago, has handled Circuit City's creative account since November 2006.