Filed under: Deals, Wal-Mart (WMT), Blockbuster Inc ‘A’ (BBI), Best Purchase (BBY), Circuit City Stores (CC)
Some mergers make less sense than others. The Blockbuster (NYSE:BBI) effort to purchase Circuit City (NYSE:CC) makes no sense at all. It is based on the hope that putting together two zombies will create one live person.
According to Reuters “Blockbuster Inc. stated on Monday that it has offered to purchase electronics retailer Circuit City Stores.” The price for the offer was in a range of $6 to $8 pending due diligence.
Why putting a consumer electronics business together with a movie rental company makes sense is anyone’s guess. Each company is having remarkable trouble staying in business.
Blockbuster’s current share price is just above $3, down from a 52-week high of $6.67. The company is being ruined by competition from online DVD sales and VOD products delivered over the internet or by cable companies. In its last fiscal year, Blockbuster made only $39 million on revenue of over $5.5 billion.
Circuit City is even worse off. It made a little profit in its most recently reported quarter, but has been losing customers to larger operators like Best Buy (NYSE:BBI) and Wal-Mart (NYSE:WMT). Circuit City shares are down from a 52-week high of $19.12 to $3.44
It is hard to see how a merger would grant for either cost cuts or revenue enhancements.
1+1=0
Douglas A. McIntyre is an editor at 247wallst.com.
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