Do you remember back in the late 80’s and early 90’s when Circuit City was the place to go for consumer electronics? Do you also remember the days when a parking spot was hard to come by in the Blockbuster Video parking lot on a Friday night? At one point both companies, Circuit City and Blockbuster Video were at the top of their game and were doing very well for themselves. Over the last several years we have seen them slowly drop in popularity and in profitability, and both are seen as companies in a bit of trouble. That’s why when we read that Blockbuster has made an offer to acquire Circuit City, we were surprised to say the least.
In a letter dated February 17th, but just made public today, Jim Keyes, Chairman and CEO of Blockbuster writes to Philip Schoonover, CEO of Circuit City to make an offer for the company. In the letter, Keyes asked that a response be made by February 21st, however no response was made. Now they’re taking a Microsoft-ish approach to this saying that they are taking an unsolicited $1 billion dollar plus bid for Circuit City directly to the shareholders.
Blockbuster’s CEO gives us a small glimpse at what they intend to do should they acquire Circuit City by saying that a deal would create a chain that could sell portable devices and entertainment for them, much like Apple Inc’s stores. In a letter to the company, Keyes writes, “Our vision for the new Blockbuster is to be the most convenient source for media entertainment.”
So now comes the issue of price. Blockbuster is offering $6 to $8 per share in cash to Circuit City which is valued at $1.01 to $1.35 billion. Friday’s closing price for Circuit City was $3.90 and this morning they were as low as $2.33, so $6-8 per share doesn’t sound all too bad. Of course once word came out that Blockbuster was after Circuit City, their shares jumped to $6.25 and Blockbuster shares dropped. Keyes said the offer is a “significant premium” to Circuit City’s share price and said the combination of the chains would create “a game-changing retail concept with a sustainable competitive advantage.”
Do you think we’ll ever see a day in the future when Circuit City is able to regain the title as #1 American Consumer Electronics Chain, a title they lost to Best Buy in the 1990’s?
Source: Engadget
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Don’t know why but I kinda like the idea of these two companies “joining forces.” Call me crazy.
Doubtful as back in ‘those days; we didn’t have Internet for steaming video, Pay-Per-View, On-Demand movies, movies by mail, etc. Back then if you wanted something you had to drive down to the brick & mortar store and purchase it. With all those ‘innovations’ for videos plus stores like Fry’s (Supermarket) and Wal Mart putting in $1 DVD rental machines I don’t see Blockbuster ever being what it use to be. My Blockbuster closed about 3 years ago.
Circuit City could be heading in the same direction as CompUSA as they have closed down several stores in the Phoenix area as well.
I sure hope not!
Can you expand on that a little further? I’m just curious why the idea sounds appealing to you. You’re probably not the only one thinking that either. I guess I’m indifferent on it, although I wouldn’t have ever paired the two together.
Circuit City does remind me of CompUSA lately. The last time I was in a CompUSA, it was pretty empty and the same goes for when I go into Circuit City stores lately. Hopefully they’ll be able to do something before they end up having to close stores.
Blockbuster would be better off spending that money remodeling their own stores and opening new ones to do what it wants to do. Circuit City no longer has a strong sales or support staff, they have all been fired; training the bottom of the barrel is harder than training people you hand picked yourself. Circuit City’s name is not all that positive, the trademark is not worth what it once was; Blockbuster really doesn’t have any negative image attached to their trademark yet os they’d be better off without the Circuit City name. For the stated purpose, many Circuit Citys stores would be a bit large for Block Buster; they need to find their own locations and start fresh on a size about three times that of an average Blockbuster store. This will be nothing but a Billion dollar nail in the coffin for Blockbuster.