Activist shareholder Mark Wattles in his efforts to push through a proposed acquisition of Circuit City Stores Inc. by Blockbuster Inc. urged the reluctant target to open its books to the video chain. Circuit City continued to rebuff his requests, and the Street did not seem to take the prospect of a $6 to $8 per share deal seriously, as the stock slipped nearly 1% to about $4.58 per share at just past noon on Thursday.
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Circuit City seems unmoved by Wattles claims that billionaire Carl Icahn has offered to backstop a shareholder rights offering to finance a deal that could be valued at up to $1.3 billion, stating that it still awaits a "viable" financing structure and answers to questions regarding Blockbuster's ability to finance a deal before it conducts further due diligence on the bid. Maybe Circuit City and the Street are waiting for Icahn to speak for himself regarding a backstop and give some detail on what portion of an offering he would backstop.
A handful of risk arbitrageurs are to say the least skeptical about any possibility of a deal between the two ailing retailers -- Circuit City, which lost $167.7 million on $11.7 billion in sales in the year ended Feb. 29, compared with an $81.8 million profit on $12.4 billion in sales in the year-ago, and Blockbuster, which up against on-demand cable services and online video rental companies like Netflix Inc., recorded an $85.1 million loss for the year ended Jan. 6. One arb called the deal "the collusion of two garbage trucks" while another termed it an " 'Ironweed' deal," referring to a 1983 William Kennedy novel later made into a film starring Jack Nicholson and Meryl Street about two alcoholic vagrants leaning on each other during the Great Depression. By the way, the movie isn't available at either retailer. - Michael Rudnick
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