Even Blockbuster's CEO Jim Keyes told the Journal that completing the deal is going to be "a challenge." The key to this deal -- as The Deal had reported earlier -- will be financier Carl Icahn, who owns 11.8% of Blockbuster and sits on its board. Icahn said he is backing the deal and could come forth as a financier to help finalize the deal.
Why Blockbuster would want Circuit City when it hasn't been able to fix itself is an interesting question. There is really only one reason the two companies should combine: cost savings. The two companies could save money just by combining retail locations and inventory. Blockbuster closed 500 stores last year, and Circuit City is cutting expenses.
Additionally, Circuit City sold $35.8 million in video alone in the first quarter of 2008, which could boost Blockbuster's revenue. Plus, by getting involved in selling other electronic devices, Blockbuster could finally expand its sales to higher priced items such as PCs, DVD players, game systems and TVs.
Like the music industry, it is only a matter of time before the movie rental industry heads completely online, and Netflix and Sony are already on board. If Blockbuster is looking for a way to catch up, the acquisition of Circuit City may be a starting point, but Circuit City may be looking for a more innovative bidder. - Maria Woehr
See TheDeal.com: Icahn key to Circuit City bid
See TheDeal.com: Blockbuster bids for Circuit City
It's not all that surprising that Circuit City Stores Inc. wants proof that Blockbuster Inc. can finance an all-cash $1.4 billion offer before takeover negotiations begin, 
