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Blockbuster has pulled its offer to buy Circuit City after finally getting the chance to look at the retailer's books.
Based on "market conditions" and after finishing its due diligence process, Blockbuster decided the acquisition wasn't in the company's best interest, said Jim Keyes, Blockbuster's CEO and chairman, in a statement on Tuesday.
In February, Blockbuster offered as much as $1.33 billion for Circuit City, with the price dependent on a review of its records. The offer appears to have been contentious from the start. The movie rental company said it first made the offer directly to Circuit City's CEO but was not allowed to review the company's books in order to set a firm offer price. It made the offer public in the hope that shareholders might pressure the company to negotiate a deal.
Pressure from some investors did ensue, and in May, Circuit City opened up its books for Blockbuster to see. Circuit City has maintained that Blockbuster has failed to adequately explain how it would finance the deal.
On Tuesday Circuit City said it would continue exploring strategic alternatives aimed at increasing shareholder value. "The board's review was not dependant on Blockbuster's participation," wrote Philip J. Schoonover, chairman, president and CEO of Circuit City, in a statement.
A combination of the two companies would allow Blockbuster to put movies on electronic devices to sell in retail stores. Such an offer could open up new avenues of distribution for Blockbuster so that it could better compete with rival Netflix, whose customers order DVDs that are sent by mail.
Blockbuster did not cite any specific items in its examination of Circuit City that caused it to rescind its offer. It did say, however, that it continues to believe that a company that combines content and electronic devices under one roof has merit. "We will pursue this strategy through our Blockbuster stores as a way to diversify the business and better serve the entertainment retail segment," Keyes said.
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