Blockbuster interested in buying Circuit City
RICHMOND, Va. Circuit City Stores confirmed on Monday, April 14, that it received an unsolicited, non-binding proposal from Blockbuster to acquire all of the outstanding shares of Circuit City for at least $6.00 per share in cash. Circuit City said that it will consult with its outside legal and financial advisors and continue to evaluate Blockbuster's offer.
The company said it is advising its shareholders to hold off on taking any action in relation to the unsolicited proposal from Blockbuster.
Circuit City noted that its board of directors has previously reviewed a similar private proposal from Blockbuster. The company said that to date Blockbuster has been unable to convince Circuit City and its advisors that its proposal could be financed. In particular, Blockbuster's proposal appears to contemplate a rights offering of unprecedented size relative to the issuing company's market capitalization and at a price that is at a significant premium to Blockbuster's current market price. Circuit City's advisors have noted that most rights offerings, of which there have been very few in the United States, occur at discounts to market.
In addition, Circuit City said it is also questioning whether Blockbuster's proposed acquisition would require a refinancing of the existing Blockbuster debt, and if so, what would be the terms and structure of any new debt; how large a rights offering would be required to fund the transaction and what steps Blockbuster has taken to provide a backstop to ensure successful execution of the rights offering contemplated; and what precise internal and external approvals Blockbuster anticipates for a proposed transaction, including approval of the contemplated rights offering by Blockbuster shareholders and registration of the offering with the Securities and Exchange Commission.
Circuit City said that until its concerns are addressed it would not provide Blockbuster with additional information.
Circuit City Stores reported net earnings of $4.5 million, or 3 cents per diluted share, for its fourth quarter ended Feb. 29 compared to a net loss of $7.2 million, or 4 cents per diluted share for the same period last year.