DALLAS — Blockbuster, the movie-rental chain that has lost half its market value in a year, has made an unsolicited $1.35 billion offer for Circuit City Stores, the money-losing consumer-electronics chain.
Blockbuster, based in Dallas, bid between $6 and $8 a share in a February letter to Circuit City chief executive Philip Schoonover, as much as double last week’s closing price. Circuit City, whose stock on Monday rose the most in at least 28 years, said in a statement it isn’t convinced Blockbuster can finance a purchase.
The Blockbuster bid is backed by director Carl Icahn, who controls about 16 percent of the chain’s Class A shares, said Circuit City investor Mark Wattles of Thornton, who holds a 6.5 percent stake in Circuit City.
Wattles has been seeking Schoonover’s ouster and a buyer for the retailer. Circuit City posted five quarterly losses before returning to profit and forecast a pretax loss for the coming year. Blockbuster’s offering price is double its own market value.
“There are no historical examples of success of a company that does one thing trying to acquire infrastructure to do something different,” said Colin McGranahan, an analyst with Sanford C. Bernstein & Co.
Circuit City, whose sales declined every quarter last year, soared $1.07, or 27 percent, to $4.97 at 4:01 p.m. in New York Stock Exchange composite trading. The shares tumbled 79 percent in the 12 months through last week. Blockbuster declined 32 cents, or 10 percent, to $2.81, the biggest decrease since January.
Wattles said Monday that Icahn told him he was prepared to support a share offering by Blockbuster by absorbing any stock that investors didn’t buy.
“Now you’re looking at an offer that would be at minimum $6 and could be $8,” Wattles said. “That’s a pretty significant premium. I view it as a very favorable transaction for shareholders relative to other opportunities.”
Blockbuster chief executive Jim Keyes said he wants to keep any transaction on “friendly terms,” as did investor Wattles.
“I’m quite anxious for this to turn into a cooperative process, as opposed to a hostile process,” Wattles told Bloomberg Television. “Although I’m prepared to support either one.”
Circuit City has 693 stores in the U.S. and 779 shops and dealer outlets in Canada. Combined, the chains would have more than 9,300 stores worldwide.
Keyes said Monday the acquisition would give Circuit City more than 4,800 additional U.S. stores and movie and video-game rentals, helping to differentiate it from Wal-Mart and Best Buy.
