Blockbuster trying to buy Circuit City. (1 Viewer)

[TonyD]

I saw blurb at hometheater retailing .com.
Seems they made an offer in feb and are making it public
To get CC to respond.

I can't post links from iPhone but the two articles on this are at home theater mag .com.

Should be able to get there from the main HTF page.

Links when I get home.

 

[Malcolm R]

I don't understand why anyone would want to buy CC, much less at such an inflated stock price. That company is a mess.

Blockbuster just straightened out their own mess, why take on another?

Saw this on one of the big news sites yesterday (Business area, of course).

 

[Kevin Hewell]

Well, I guess it's a good thing to keep CC operating as a way to keep Best Buy competitive.

 

[Mort Corey]

Funny thing is that Blockbuster is offering more money than the total value of all their shares.....wonder how that works? Combining two losers probably won't make a winner anyway.

Mort

 

[KurtEP]

I'd guess that someone at Blockbuster looked into their crystal ball and saw the decline of the rental market, so they decided to try to purchase a company in a different line of business while they still had money (kind of like the AOL/Time Warner thing).

 

[Bryan^H]

Alot of talk about CC doing horribly, well Funny thing about that. My friend worked there for a few months(in the tv department) and he said it was shocking how much buisness they do on the big, high dollar items. He would sell sometimes six high end tv's on a slow day without trying(on a good day maybe twenty). 99% of all the sales the buyer would purchase the buyer protection policy, which if you know CC's BPP, it is extremely expensive, and with the rate of tv's going bad(how many tv's from a big name have issues in the first few years?) is pure and excessive profit from the bpp's alone.

They may not have it together, but they still make a killing on tv's, computers, and bpp's, and that is keeping them alive

 

[Bob Graz]

Blockbuster must have something up their sleeve. As Circuit City stands today, I can't imagine anyone wants them. Circuit City has lost it's way over time. It would be nice to see it turned into a useful store with some sort of retail/business strategy.

 

[Dan1]

The Blockbuster + Circuit City combo makes no sense at all. I can't see how it would work out in the retail environment. Will Blockbusters start selling small electronic items? Any MBAs out there with an explanation for this one??

 

[TonyD]

2 articles.

HomeMediaMagazine.com | Bringing Digital Entertainment To You

Wall Street April 14 reacted negatively to news that Blockbuster Inc. had tendered a $6-to-$8 per-share cash offer for consumer electronics retailer Circuit City Stores Inc.

Dallas-based Blockbuster, which sent the proposal via letter to Circuit City chairman and CEO Philip Schoonover Feb. 14, said it went public after Circuit City failed to respond and provide regulatory due diligence.

The news sent Blockbuster shares falling more than 13% as analysts attempted to come to terms with the proposal one called “bone headed.”

The No. 1 DVD rental service said publicizing the bid would make Circuit City shareholders aware of their options and give them an opportunity in determining “the destiny” of the company.

The company said Blockbuster board member and largest shareholder Carl Icahn supported the move and a report said the maverick investor was willing to back the deal financially.

Combining Blockbuster and Circuit City would realize an $18 billion global retail enterprise. Blockbuster operates nearly 8,000 stores globally while Circuit City operates 693 stores domestically and 779 locations abroad.

“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,” said Blockbuster CEO Jim Keyes, in a statement.

The former top executive at 7-Eleven, Keyes has mandated transitioning Blockbuster into a retail-centric entertainment provider that delivers both packaged and digital media.

Richmond, Va.-based Circuit City has been under pressure to resurrect itself as revenue and earnings results continue to disappoint.

Adding to the tumult, dissident shareholder Mark Wattles, who co-founded Hollywood Video, recently submitted a slate of board nominees and called for new management, including the firing of Schoonover.

Circuit City said it would not cooperate after failing to receive proper financial assurances from Blockbuster. The retailer advised its shareholders to reserve judgment.

“While willing to engage in discussions to further understand Blockbuster's proposal, Circuit City is unwilling to provide additional detailed due diligence information and embark on a highly conditional undertaking until these questions are answered satisfactorily,” the retailer said in a statement.

Speaking to investors Monday, Keyes said Blockbuster’s offer was compelling and at $6 per share represented a 54% premium on Circuit City’s closing price April 11.

He said that despite initial negativity by the market toward the offer, Blockbuster remained committed and believed the upside for shareholders of both companies was “simply too attractive to ignore.”

The CEO said the rental company had the cash to complete the deal but was willing to issue additional shares to existing shareholders to make it happen. Keyes said the move did not reflect a retraction of efforts toward distributing movie rentals via kiosks and electronically.

His enthusiasm was perhaps bolstered by the fact that Blockbuster expects to report a profit of $30 million for the first quarter fiscal 2008 (which ended March 31), compared to a loss of $49 million during the same period in the previous year.

Keyes said combining Blockbuster’s entertainment content with Circuit City’s CE prowess would result in a financially stronger company and a “compelling consumer proposition … that our peers simply could not match.”

The CEO envisioned a Blockbuster rental kiosk in Circuit City stores and Circuit City video game terminals in Blockbuster.

Analysts aren’t so sure.

Henry Blodget and Aaron Task, analysts with Yahoo’s Tech Ticker, belittled the proposal, calling it one of the worst mergers & acquisition offers ever.

The two said they first assumed Best Buy Co. had made the offer and couldn’t believe it was actually Blockbuster, which they said doesn’t have the available cash or mojo to pull it off.

“It’s just hard to fathom how these two companies are going to come together that makes sense,” Task said. “It’s really ridiculous.”

Blodget said that conceptually combining Blockbuster with a major CE retailer would work only if you ignored the evolution of entertainment distribution, including DVD rental pioneer Netflix Inc., digital video recorders and video-on-demand.

He said both companies are in trouble financially, with Blockbuster and Circuit City’s stocks down 52% and nearly 80%, respectively, from a year ago.

Task said Circuit City continues to be plagued by poor strategic planning, including the firing of more than 3,400 sales personnel he said actually knew what they were selling.

“If I’m a Circuit City shareholder this morning, I’m saying, ‘thank you Blockbuster, I’ll take your cash,’” Task said. “If you put two bricks together, they’re still not going to float.”

“It just screams trouble,” Blodget said.

Michael Pachter, media analyst with Wedbush Morgan Securities in Los Angeles, was equally circumspect.

He said Circuit City had been slow to respond since it didn’t think Blockbuster had the financing to make its bid viable.

“We are surprised by this news and do not believe that Blockbuster’s desire to acquire Circuit City is good for Blockbuster,” Pachter said in a note.

He said Blockbuster’s stock would rebound once management abandoned the bid following investor concerns.

“We believe it is prudent for Blockbuster to stay the course on its own restructuring, with ever-increasing focus to accelerate the pace of asset sales and debt repayment, with a more immediate return to shareholders,” Pachter said.

 

[TonyD]

second


Blockbuster bids on Circuit City - 4/14/2008 - Video Business

Blockbuster bids on Circuit City
UPDATE: Electronics retailer questions financial viability of $6 a share offer
By Danny King -- Video Business, 4/14/2008

APRIL 14 | Blockbuster said early today that it made an offer for at least $6 a share for Circuit City in February and that the No. 2 electronics retailer hadn’t fulfilled a request for due diligence necessary to make the bid “definitive.”

Circuit City, whose stock price surged about 30% on the news, questioned whether Blockbuster could finance the acquisition and said more financing information would be required for it to respond to the offer.

Blockbuster, the largest U.S. movie-rental chain, made the offer in a Feb. 17 letter to Circuit City CEO Philip Schoonover, who hasn’t responded to the bid. The offer was at least 27% more than Circuit City’s $4.74 closing price on Feb. 15, the previous day the stock traded.

With the bid, Blockbuster, in the midst of a turnaround as its losses from its Total Access online-subscription program have narrowed, is trying to boost home-entertainment sales and profits by integrating content such as DVDs and downloads with the media-delivery products of Circuit City. Last month, Blockbuster said fourth-quarter earnings quadrupled.

“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,” Blockbuster CEO James Keyes said in a statement early today. “We believe the combination will result in a compelling consumer proposition that will drive significant revenue and margin enhancements as well as cost synergies.”

Circuit City, which said Blockbuster has previously made a similar offer, questioned whether Blockbuster would need to refinance its debt given Circuit City's larger market value. Blockbuster's market value on Feb. 15 was about $600 million, or about three-quarters of Circuit City's $800 million market value that day.

"While willing to engage in discussions to further understand Blockbuster's proposal, having shared certain information with Blockbuster, Circuit City is unwilling to provide Blockbuster with additional detailed due diligence information and embark on a highly conditional undertakinig until these questions are answered satisfactorily," a statement from the consumer electronics retailer said.

Circuit City last week reported a fiscal fourth-quarter operating loss, as weaker video-equipment sales offset revenue gains for flat-panel TVs and videogaming products. The company, which has lost money for five of the last six quarters, has received pressure this year from shareholder Mark Wattles to replace its board. Wattles, who founded movie-rental chain Hollywood Entertainment and whose Wattles Capital Management owns about 6.5% of Circuit City, has called the company’s turnaround effort “disastrous.”

Blockbuster today said it made the bid public to give Circuit City shareholders a chance to respond, adding that it looked “forward to engaging in further conversations with Circuit City and reaching an agreement as soon as possible.”

Circuit City, whose stock price surged about 30% today, questioned whether Blockbuster could finance the acquisition and said more financing information would be required for it to respond to the offer.

Circuit City, whose stock price surged about 30% today, questioned whether Blockbuster could finance the acquisition and said more financing information would be required for it to respond to the offer.

Circuit City, whose stock price surged about 30% today, questioned whether Blockbuster could finance the acquisition and said more financing information would be required for it to respond to the offer.

 

[TonyD]

i can only go by what they tell us and what i see in my bbv.

the retail section of the dvds has grown over the last few months.
almost all stores will have a blu-ray area for sale and rent.

there wil be a larger presence of video games.

this week or next there will be a "new game section" on the same wall as the dvds.

as of today we are now selling video game systems.

today we received xbox 360's, ps3's and Wii's.

it looks like, to us, the retail area will gain a larger foot print in bbv stores.

how that connects to CC, you got me.