Circuit City Stores Inc. (Richmond, Va.) has said it will allow Blockbuster Inc. (Dallas) to examine its books. The agreement is a shift in policy from the consumer electronics retailer’s previous response to Blockbuster’s recent takeover bid of more than $1 billion in cash.
At the time of the solicitation, Circuit City executives expressed skepticism that Blockbuster, struggling itself with negative market forces, would be able to afford the acquisition.
A letter from Blockbuster shareholder Carl Icahn apparently pledged the billionaire investor to buy the company on his own (with certain conditions) if Blockbuster should be unable to finance the deal. Circuit City said in a statement that “this written commitment answers some of its questions with regard to Blockbuster’s and Mr. Icahn’s previous disclosures.”
Blockbuster said it was pleased with Circuit City’s decision and continued to believe in the benefits of a merger. But it added that it was “committed to only doing a transaction that provides substantial benefits for our shareholders.” Circuit City made it clear that it was considering all of its options, and not just the Blockbuster offer.
“While the Circuit City board has confidence in the company's ability to successfully implement its turnaround plan and generate shareholder value, we believe that we can best serve the interests of our shareholders by exploring all possible alternatives to enhance shareholder value,” said chairman, president and ceo Philip J. Schoonover. “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.”