In a statement Monday, Blockbuster chairman and CEO Jim Keyesrevealed a letter to Circuit City chairman, president and CEOPhilip Schoonover that shows his firm has been chasing Circuit Citysince at least February. "The combination...will result in an $18billion retail enterprise uniquely positioned for the convergenceof media content and electronic devices," Keyes said in theletter.

|

However, it's not clear what that means, and a conference callMonday didn't really clear things up. It's assumed that eachcompany's products would be offered in joint stores. But whilegiant Blockbuster has more than 7,800 stores across the globe, andfinally reported a same-story sale increase for the fourth quarter,the electronics company has 1,472, albeit bigger, stores in the USand Canada, and recently reported a $320 million loss during itspast fiscal year.

|

Circuit City responded in a statement Monday by putting on thebrakes, advising shareholders to take no action. Blockbuster hasbeen unable to satisfy Circuit City and its advisors that theproposal could be financed, said Circuit City officials in thestatement.

|

Blockbuster has said it can find the cash through a stock saleand financing. However, Circuit City officials said there aredoubts it can be done, especially in the current day's economy.Officials added, "In particular, Blockbuster's proposal appears tocontemplate a rights offering of unprecedented size, relative tothe issuing company's market capitalization, and at a price that isat a significant premium to Blockbuster's current market price.Circuit City's advisors have noted that most rights offerings, ofwhich there have been very few in the United States, occur atdiscounts to market."

|

While Blockbuster's stock dropped from 10% to $2.81 per shareMonday, Circuit City's actually rose to a two-month high and endedthe day at $4.97 per share. The electronics stock has been on aslide since it was at $19 per share almost a year ago, and was uparound $30 per share two years ago, it's five-year peak.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.