NEWS - Monday, April 14, 2008

Blockbuster Offers to Acquire Circuit City

Blockbuster has made public an offer to acquire electronics retailer Circuit City in an apparent attempt to convince shareholders of the struggling company that the deal is in their best interest.

Blockbuster made the offer back in February to purchase all outstanding shares of Circuit City for more than USD 1 billion, or approximately USD 6 - 8 per share.

Michael Pachter, an analyst with Wedbush Morgan Securities, expressed surprise at the news and was skeptical that the transaction would yield "significant synergies" over the foreseeable future.

"We think that Blockbuster’s move is premature, and borders on being reckless," Pachter said.

He noted Circuit City’s challenge competing against a well-run competitor in a worsening economic environment, and expressed doubt that Blockbuster’s management could compete effectively in the "big box" retail arena.

He also pointed out that any progress on the digital convergence made by Blockbuster in Circuit City stores can quickly trigger a response from competing retailer Best Buy, who has a long-standing relationship with Apple.

Circuit City said that it was still evaluating the offer. Shares in the company rose 29 per cent today on the news, even as shares in Blockbuster dropped 12 per cent.


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