Blockbuster Wants To Own Circuit City?

Corporate Buyouts are the new Pink!

I'm not sure whether it's that there seems to be more and more talk of buyouts lately, or if I'm just more keen to spot them in the wake of the Microhoo! drama, but in any case it seems like at least once a week there's a new corporate buyout saga bearing out. The merger du jour this week is a proposed offer from Blockbuster to buy out Circuit City! The video rental Goliath has offered to buy Circuit City for a whopping $6 a share... not $6 over market value, just $6 a share, which comes out to just $1.6 Billion. Yeah, I know, the word just shouldn't ever be used when talking about billions of dollars, but when you consider the price tag the failing Yahoo! is demanding of Microsoft, and the fact that the $1.6 billion will include all the property and buildings and inventory of Circuit City, that just doesn't seem like much.

Putting the dollar figures to the side, I have to wonder what the logic is here. Circuit City is just not performing well lately, and a revival seems unlikely. Concurrently, Blockbuster isn't doing well as they have been unsuccessful breaking into the online video rental market. So what could these companies want with each other? Your guess there is as good as mine, but the problem I see is where in the world is Blockbuster going to come up with the money for this? For a company with staggering debt, how can they convince investors to back this purchase? And what's their plan once the purchase goes through to turn both companies around and pay back those investors?

To date, Circuit City has not officially responded to Blockbuster, but they have stated that they are looking at the deal. For those out there looking to make a TV purchase or some other electronics, this may be a good time to head into Circuit City and look for a deal, as they will likely try to increase sales, and thereby value, through price cuts and value deals. In the meantime, let's all just sit back and watch the mega-retailers crumble.

Blockbuster Offers to Buy Circuit City [PC Mag]