Date: 04-16-2008
Blockbuster, the video rental giant that is currently struggling through a financial crisis, made an offer Monday to acquire Circuit City for $1.3 billion amidst skeptical remarks by many analysts. The offer, which would amount to approximately $6 per share, is being touted by Blockbuster as a move to strategically combine two retailers focused on electronic and digital media. Shares of the video rental giant dropped by 10%, however, as investors and shareholders were doubtful and apprehensive about the offer. The bid, which would be an all-cash deal, offers a high premium over Circuit City’s recent closing price of $3.90 per share. Blockbuster has also argued that a merger of the two struggling retailers could cut costs and bring benefits from selling complementary products. Meanwhile, Circuit City was doubtful that Blockbuster had adequate financial holdings to complete the purchase, even after being assured that billionaire investor Carl Icahn, a Blockbuster shareholder, would lend his financial support to the deal, if necessary.
