Goldman Sachs to explore $1 billion offer

Circuit City is opening its books to Blockbuster after several months of playing hard to get.

The struggling electronics chain said Friday that it has retained Goldman Sachs to explore Blockbuster’s $1 billion takeover bid, among other shareholder options. Blockbuster offered $6-$8 per share on Feb. 17, but Circuit City refused to take the bid seriously at first, casting doubt on Blockbuster’s ability to pony up the all-cash offer (Daily Variety, April 15).

Circuit City’s board changed its mind after Blockbuster put shareholder Carl Icahn’s offer to cover the cost himself in writing. Icahn is Blockbuster’s largest shareholder and a director at the company.

Circuit City said it will now cooperate with Blockbuster’s request for additional information as part of its due diligence. Philip Schoonover, chair, prexy and CEO of the chain, said its board remains confident about the company’s ability “to successfully implement its turnaround plan” but decided to explore all possible alternatives.

This decision, he noted, should not be construed as commitment to a Blockbuster deal.

Wall Street has been tepid about the pact, but vid execs find it more intriguing. Circuit City is a key sell-through player and has been very aggressive about new-release pricing.

The deal also has a champion in Hollywood Video founder Mark Wattles, who owns 6.5% of Circuit City stock through Wattles Capital Management. He had threatened a proxy fight but dropped that bid after Circuit City agreed to nominate three WCM candidates for board of director slots.

Blockbuster said it was pleased that Circuit City decided to cooperate and reiterated its belief in the deal. The chain has been pursuing a number of alternate revenue streams, including Paramount’s pay TV venture.

The vidtailer’s shares dropped 2¢ to finish at $2.66 on Friday. Circuit City’s shares rose 6% to $5.07.

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