Blockbuster Inc. has made public an offer it pitched in February to buy Circuit City for $1 billion in an effort to boost sales between the two companies.
The combination would result in an $18 billion retail enterprise, Jim Keyes, Blockbuster chairman and CEO, wrote in a letter to Philip J. Schoonover, Circuit City’s chairman, president, and CEO dated Feb. 17. The two companies would benefit from complementary products, marketing, management strengths, technology and distribution, he said.
“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 Keyes said. “We believe the combination will result in a compelling consumer proposition that will drive significant revenue and margin enhancements as well as cost synergies.”
Blockbuster said it made its proposal public because Circuit City didn’t provide due diligence to let the firm make a solid offering.
The movie-rental firm said it has been in talks with Circuit City for months regarding an acquisition. Blockbuster operates more than 7,800 globally and Circuit City runs close to 700 stores in the U.S. and 778 in Canada.
Circuit City on Monday confirmed it received Blockbuster’s proposal, but said its advisers still have questions about it.
“To date Blockbuster has been unable to satisfy Circuit City and its advisors that Blockbuster’s proposal could be financed,” Circuit City said in a statement.
The offer comes amid a shakeup at the Circuit City’s executive level. The chief marketing officer resigned last month after 18 months in the post. A replacement has not yet been named. The consumer electronics store has also been exploring small concept stores in an effort to turnaround sales.