Blockbuster-Circuit City deal was one of the silliest in memory
Posted by: in Latest NewsFiled under: Deals, Blockbuster Inc ‘A’ (BBI), Circuit City Stores (CC)
One of the silliest possible mergers in recent memory (no small accomplishment) is dead in the water now that Blockbuster (NYSE: BBI) has announced that it will no longer pursue its previously announced effort to acquire Circuit City (NYSE: CC).
In a press release issued yesterday afternoon, Jim Keyes, Blockbuster Chairman and CEO, stated that “Based on market conditions and the completion of our initial due diligence process, we’ve determined that it isn’t in the ideal interest of Blockbuster’s shareholders to proceed with an acquisition of Circuit City.”
Given the shares of Blockbuster tanked when the company announced its initial offer, the company’s shares could be expected to trade up today.
For Circuit City, the situation is more grim. With its stock in the toilet, Blockbuster’s offer represented one of the few exit strategies. Blockbuster’s assertion that its “initial due diligence” was a factor in its decision to withdraw its offer indicates that the company’s financial situation might be worse than it appears to outside shareholders.
In a press release offered in response, Philip J. Schoonover , chairman, president and chief executive officer of Circuit City, said that “Our exploration of strategic alternatives is intended to serve the interests of our shareholders by considering each possible alternative to enhance shareholder value. The board’s review wasn’t dependent on Blockbuster’s participation.”
But Blockbuster was the only suitor to emerge publicly so far and, now that it’s lost interest, there’s little reason to expect anyone else to emerge.
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