In a not-so-stunning announcement last night, Blockbuster announced that it has withdrawn its bid for Circuit City due to concerns over the viability of the big box retailer.
"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. "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. We will pursue this strategy through our Blockbuster stores as a way to diversify the business and better serve the entertainment retail segment."
Ever since this deal was announced, I've said it would never happen and was one of the few that said it wasn't worth the trouble. First off, Blockbuster didn't even have the funds to acquire Circuit City, and secondly, I simply didn't understand why a company with its own financial woes would want to be involved with another facing extreme pressure.
Evidently the shareholders agreed with my evaluation. Even though Blockbuster offered $6 per share -- a 54 percent premium -- Circuit City stock hasn't seen $6 since December of last year. In other words, no one was excited about this deal and they quickly realized that Blockbuster was bidding far too much for a company that's worth far too little.
But what happens next for these companies? Will Blockbuster try something new? Will Circuit City be swallowed up by a different company?
Here's what I think:… Read more