Blockbuster Inc. has dropped its bid for Circuit City Stores Inc. after completing its review of the money-losing Richmond company's books.
Jim Keyes, CEO of the Dallas-based video rental company, issued a terse statement: "The company decided it was not in the best interest of Blockbuster shareholders to acquire Circuit City." He offered no explanation.
But Keyes reaffirmed his thinking that led him to make the $1.3 billion offer. According to a Blockbuster press release, the company still believes in the idea of bringing media content and electronic devices together under one brand. The company will pursue that strategy through its stores "as a way to diversify the business and better serve the entertainment retail segment."
The decision comes as little surprise. Wall Street investors have been discounting Circuit City shares for several weeks on the premise that the deal would never go through. Now that Blockbuster has dropped out of the running, that leaves two companies that, according to shareholder and director Mark J. Wattles, are in the final stages of due diligence. Wattles did not identify the companies, which have yet to put a concrete offer on the table.
Circuit City has hired an investment banking firm to help it review "strategic alternatives to enhance shareholder value" -- a Wall Street euphemism for finding someone willing to buy the company.
Circuit City CEO Philip J. Schoonover responded to the Blockbuster announcement with a statement of his own:
"Our exploration of strategic alternatives is intended to serve the interests of our shareholders by considering every possible alternative to enhance shareholder value. The board's review was not dependent on Blockbuster's participation. We are diligently working with the parties involved in the process, and intend to continue our thorough approach until such point as the board determines upon a particular strategic course of action. The board has not established a deadline for completing the review."
Circuit City shares, which sold as high as $30 in 2006, plunged from a high of $3.50 per share Friday to about $2.50 yesterday.