Blockbuster bids over $1B for Circuit City, looks to rival Apple storesMovie rental house Blockbuster has made an unsolicited takeover bid for struggling electronics retailer Circuit City, a move that aims to combine the stores of both companies into "a game-changing retail concept" akin to Apple Inc.'s widely successful international retail operation.
Blockbuster made the all-cash offer of $6.00 to $8.00 per share in a February 17th letter to Circuit City's chairman following months of informal negotiations between the two companies, the company revealed in a statement Monday. Based on the closing price of Circuit City's 168.4 million shares on December 31, 2007, the deal values the No. 2 US electronics retailer at approximately $1.01 to $1.35 billion.
Blockbuster said the combination of the two companies would result in an $18 billion global retail enterprise uniquely positioned to capitalize on the growing convergence of media content and electronic devices, which has thus far been dominated by the efforts of Cupertino-based Apple through its tightly-knit ecosystem of hardware, software, and online services.
Word of the offer comes a week after reports suggested that Blockbuster was also evaluating a plan to enter the electronics hardware business with a set-top-box that, like Apple TV, would allow customers of its Movielink service to stream movie rentals to their high-definition TV sets.
"Our proposal offers Circuit City a significant premium to its existing stock price and creates a game-changing retail concept with a sustainable competitive advantage," said Blockbuster chief executive Jim Keyes. "We believe the combination will result in a compelling consumer proposition that will drive significant revenue and margin enhancements as well as cost synergies."
Circuit City, which operates nearly 700 stores across the US, had yet to respond to Blockbuster's offer as of Monday, compelling the movie rental chain to make its proposal public because "it believes the shareholders of Circuit City should have the opportunity to participate in determining the destiny of the company."
Should the deal ultimately receive approval, it will form a combined retail chain of over 9,500 stores, including nearly 6,000 in the US. By comparison, Apple along with electronics retail partner Best Buy currently operate around 800 US-based retail points for the former's electronic device offerings.
Blockbuster isn't the only technology player looking to replicate the success of Apple's retail business. Last week it was reported the Microsoft is also mulling the prospect of opening a self-branded chain of retail stores to promote its Windows franchise.