Blockbuster Proposes Combination With Circuit City
Blockbuster Inc. (NYSE: BBI) today announced that it has offered to acquire Circuit City Stores, Inc. (NYSE: CC) for at least $6.00 per share in cash, subject to due diligence. The offer was made in a letter sent to Circuit City Chairman …
Context & Ripple Effects
Blockbuster’s 2007 purchase of Movielink gave it a foothold in digital movie distribution. The proposed cash acquisition of Circuit City would pair that effort with a national electronics retailer, subject to due diligence.
First-order effects
- Circuit City’s board and shareholders must evaluate Blockbuster’s offer of at least $6 per share in cash, while both companies face the uncertainty of diligence rather than a completed transaction.
- Blockbuster would gain a direct retail channel for consumer electronics and entertainment products if Circuit City accepts the proposal.
Second-order effects
- A combined Blockbuster-Circuit City would put video distribution, store traffic and electronics sales under one owner, increasing pressure on rival retailers to defend customers buying playback devices and movies together.
Third-order effects
- The proposal points to retailers seeking control across entertainment formats and the devices that deliver them, rather than treating movie distribution and electronics sales as separate businesses.
The trend: Entertainment retailers are pursuing convergence between content distribution and consumer-electronics retail channels.