Circuit City to open its books to Blockbuster, Icahn
Retailer Circuit City has secured Goldman Sachs to advise it on its future moves and confirmed it had received information on how a buyout by Blockbuster would be financed.
Circuit City said it will consider all proposals, although it stressed it had not come to a decision on any single alternative. Furthermore, the company will no longer comment on any future moves until the board approves a particular plan.
Blockbuster in mid-April offered to purchase Circuit City in a deal worth about $6-8 per share, or around $1.3 billion. The retailer responded that it wanted to talk, but would not open its books over concerns about financing.
From Friday's comments, it appears those fears have been allayed. In addition, billionaire activist investor Carl Icahn added in a letter to Circuit City that he and his associates are ready to make a bid for the company if Blockbuster cannot raise the cash.
"Let me be clear that our decision to allow Blockbuster and Carl Icahn to conduct due diligence should not be taken as an indication that the board has completed its review of the Blockbuster proposal, that the board has taken a position on the company's value or that it has settled upon a particular strategic course of action," the retailers CEO Philip Schoonover said in a statement.
Blockbuster believes that a combined company would be "uniquely positioned" to take advantage of the growing strength of digital content.
"Both companies would benefit from complementary products, marketing, management strengths, technology and distribution and the resulting synergies would significantly improve consolidated financial performance," Blockbuster's CEO Jim Keyes has said previously.
However, the biggest concerns remain the financing, and Blockbuster has had its share of difficulties in that department. Following a battle with Netflix over online rentals that it ultimately retreated from, there's not much financial wiggle room for the company.
That's not stopping Blockbuster. "We are committed to only doing a transaction that provides substantial benefits for our shareholders," it said in a statement on Friday.