Icahn prepared to buy Circuit City if Blockbuster can't
NEW YORK -- Circuit City also revealed that it received a letter from Blockbuster indicating that the company's largest shareholder, investor Carl Icahn, is prepared to buy Circuit City on his own if Blockbuster can't get financing or can't get shareholder approval.
Circuit City Stores said it hired Goldman Sachs to explore strategic alternatives, which may include a sale of the company, but that its board has not determined to pursue a particular option.
Shares of Circuit City gained Friday.
Blockbuster publicly announced a takeover bid of just over $1 billion for Circuit City with plans for creating a huge chain that would sell electronic gadgets and rent movies and games. Circuit City has said it doubts Blockbuster could finance the deal and has resisted opening its books.
Blockbuster said Friday that it is pleased to reach a "due diligence" agreement with Circuit City.
"While it is our hope that the due diligence process will reinforce both the strategic and financial rationale behind the deal, we are committed to only doing a transaction that provides substantial benefits for our shareholders," the company said.
Circuit City said the Icahn letter answered some questions related to the potential transaction. But Philip Schoonover, Circuit City's chairman, president and chief executive, cautioned about reading too much into the current state of the discussions.
"Let me be clear that our decision to allow Blockbuster and Carl Icahn to conduct due diligence should not be taken as an indication that the board has completed its review of the Blockbuster proposal, that the board has taken a position on the company's value or that it has settled upon a particular strategic course of action," he said.
Circuit City also reached a deal to put three of Wattles Capital Management's board nominees up for election at its annual meeting, potentially avoiding a proxy battle with the activist minority shareholder.
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