The directors of Circuit City Stores Inc. (Richmond, Va.) voted to refuse last month’s $3.25 billion acquisition bid by Highfields Capital Management LP, a Boston-based hedge fund and Circuit City shareholder.
The board said it had unanimously determined that further exploring the transaction proposed by Highfields or other sale alternatives would not be in the best interests of the company’s shareholders, and that the company can best maximize shareholder value by continuing to aggressively implement the strategic, operational and financial initiatives currently under way and contemplated for the future.
“The board of directors, with the help of outside advisors, carefully evaluated all relevant aspects of the Highfields proposal and of a possible sale process, including the significant risks and uncertainties associated with such a process,” said chairman and ceo W. Alan McCollough. “Among factors the board considered were the company’s existing strengths, business opportunities and financial prospects, including the many strategic, operational and financial initiatives already under way to improve the business. Less than two years ago, the board received and rejected an offer of $8 per share for the company [from another Circuit City stockholder, Carlos Slim Helú, the former chairman of Teléfonos de México]. Since that time, the company has made significant progress in positioning itself strategically, operationally and financially for long-term strength and success. We are committed to continuing to unlock shareholder value in Circuit City. The board, management and our more than 40,000 associates are focused on that goal by improving our operations and identifying innovations that can enhance our competitive position. Rewarding our shareholders for their confidence in us has always been, and will continue to be, our highest priority.”
Highfields, one of Circuit City’s largest shareholders with about 6.8 percent of company stock, had said in a letter on Feb. 11, 2005, that it was disappointed by the company’s recent performance and wanted to buy the company to turn it around.