Blockbuster offers up to $1.33 billion for Circuit City

by Dan Nystedt

April 14, 2008 —

Blockbuster has offered
to buy Circuit
City Stores for as much as US$1.33 billion in a deal aimed at taking advantage
of the global trend of putting media content on electronic devices, the U.S.
movie rental giant said Monday.

Blockbuster has offered $6 to $8 per share in cash for Circuit City, depending
on the results of a check of Circuit City's books. The per share offer presents
a huge markup from Circuit City's closing stock price on Friday of $3.90, and
values the company at between $990 million and $1.33 billion, based on the number
of outstanding shares of stock Circuit
City reported in its most recent quarterly earnings.

Merging with Circuit City would create an $18 billion global retail company
and substantially improve the financial performance of the two companies, Blockbuster
said.

The deal would allow Blockbuster to open up new avenues of distribution to
better compete with rival Netflix, whose clients order rental discs on the Internet
and receive them by mail.

Circuit City's share price has fallen 80 percent over the past year amid fierce
competition with Best Buy and other electronics retailers. Circuit City reported
a $319.9 million net loss for the year to Feb. 28, as its sales dropped 5.5
percent to $11.74 billion.

Blockbuster initially made the cash offer directly to Circuit City chairman
and CEO Philip Schoonover in a letter dated Feb. 17, it said. But Circuit City
has not allowed Blockbuster to perform the due diligence necessary to make a
it decided to go public with the offer in the hope that Circuit City shareholders
will call for action.

The Blockbuster board of directors has already approved the deal.

Blockbuster said its own turnaround strategies have been paying off. The company
expects to report a first quarter net profit of $30 million, compared to a net
loss of $49 million the same time a year ago.

IDG News Service