Blockbuster announced late Tuesday that it has decided to withdraw its proposal to acquire Circuit City. This comes after the video rental giant made it clear in April 2008 that it intended to purchase Circuit City in a deal with up to $1.35 billion.
“Based on market conditions and the completion of our initial due diligence process, we have determined that it is not in the best interest of Blockbuster’s shareholders to proceed with an acquisition of Circuit City,” said Jim Keyes, Blockbuster Chairman and CEO.
Shares of Blockbuster jumped 10 percent on release of the news, while Circuit City shares fell 15 percent to hit a new low.
Blockbuster made the details of the deal, an offer to acquire Circuit City for $6 to $8 per share, public after the big box retailer failed to provide due diligence necessary to allow Blockbuster to make a definitive proposal.
Less than a month later, Circuit City gave up the fight and opened the books for Blockbuster’s review, opening the door for a possible acquisition. Blockbuster’s original intention was to use Circuit City to help further its vision of a business that would serve a consumer’s full media entertainment needs, and lessen its dependence on the rental market. Such a business combination would have lead to an estimated $18 billion retail enterprise.
Even without Circuit City in the picture, Blockbuster maintains its goal of business expansion into other markets.
“We continue to believe in the strategic merits of a consumer retail proposition that would bring media content and electronic devices together under one brand,” Keyes added. “We will pursue this strategy through our Blockbuster stores as a way to diversify the business and better serve the entertainment retail segment.”