Follow Up: Circuit City Rejects Blockbuster Takeover Offer

Yesterday, I reported that Blockbuster has taken its unsolicited $1 billion takeover offer for Circuit City directly to the electronics retailer's shareholders. Since then, questions have emerged about the offer, as have some new developments.

Blockbuster first approached Circuit City about the takeover bid in February, but did so privately. But both Blockbuster and Circuit City have been struggling financially lately, with Blockbuster working to find a replacement the slowly dying movie disc rental business. Circuit City says it rejected Blockbuster's offer because it doubted that Blockbuster could raise the necessary financing.

Wall Street, meanwhile, has reacted with shock at the offer. Analysts see the proposed merger as a combination of two failing companies, and one that doesn't make financial sense. Both companies, they note, have plenty of issues that need to be addressed outside of any merger.

Citing Blockbuster's inability to actually finance the deal, Circuit City rejected it and cautioned its shareholders to take no action. Since the deal went public, Circuit City's stock price has soared almost 30 percent to just under $5. Meanwhile, Blockbuster's stock has sunk on the news, to less than $3 a share.

TAGS: Windows 8
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