Movie-rental chain Blockbuster announced Tuesday that it has withdrawn its $1 billion bid for consumer electronics chain Circuit City.
Chief Executive James Keyes blamed "market conditions" for the demise of the proposed deal, valued at one time at more than $1.3 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," Keyes said in a statement. "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."
Blockbuster shares jumped nearly 12 percent, while Circuit City fell 14 percent in after-hours trading following the announcement.
Blockbuster made its offer for Circuit City in February but it was only made public in April.
A combination of the two companies would have added up to an $18 billion business, according to Blockbuster's calculations. Both companies have struggled in the past year--Circuit City posted a $200 million loss near the end of 2007, and Blockbuster has been fending off Netflix's success in online video rentals, as well as the growing threat of digital movie downloads.