CircuitBuster Would Merge Failure With Fiasco
Wow. Blockbuster is completely out of ideas, isn’t it? This morning the foundering movie rental chain went public with its bid to acquire ailing retail consumer-electronics chain Circuit City.
In a Feb. 17 letter to Circuit City CEO Philip Schoonover, Blockbuster (BBI) offered to pay more than $1 billion for the chain. But, to date, Circuit City (CC) hasn’t fulfilled a request for due diligence necessary to make the bid definitive.
Why? In a conference call today, Blockbuster chief exec Jim Keyes described the offer as “simply too attractive to ignore.” But it seems Circuit City also thinks the offer might be too attractive for Blockbuster to finance. “… To date Blockbuster has been unable to satisfy Circuit City and its advisers that Blockbuster’s proposal could be financed,” the electronics retailer said in a statement. “In particular, Blockbuster’s proposal appears to contemplate a rights offering of unprecedented size relative to the issuing company’s market capitalization and at a price that is at a significant premium to Blockbuster’s current market price.”
Well, yes, there is that. And, of course, there are other issues as well. Like what, exactly, are the synergies between a foundering movie rental chain and a foundering electronics retailer–aside from the fact that they’re both, you know, foundering? If it’s Blockbuster rental kiosks in Circuit City stores, the alliance would seem doomed to failure. Wait. It is Blockbuster rental kiosks in Circuit City stores?
To be fair, Keyes says digital content is important too, and he seems convinced that Circuit City will provide Blockbuster with the infrastructure it needs to distribute video to TVs and mobile devices. “What this combination provides is the ultimate distribution channel for [digital] content,” he said this morning. “It’s not necessarily downloading content to the PC that will ultimately capture the consumer’s imagination. It’s the opportunity to get that content on your TV and your mobile device that is a game-changing opportunity.”
A game-changing opportunity for Apple (AAPL), maybe. But for a foundering, outdated video-rental outfit?
Comments
Thanks for sharing the view of the “herd”, but just what the heck is a “foundering company” anyway? I have heard of companies “floundering” but am wondering if being a cutting-edge journalist, you have added a new phrase to the lexicon and I am just behind the times — something that wouldn’t surprise anyone given that I would also rather bet that Carl Ichan actually might have a clue how to make money than I would that you understand the potential for this deal. The one area we will agree is that conventional opinion appears very negative regarding the proposal; in my language that spells opportunity.
Posted by Michael McDonald at April 14th, 2008 at 12:20 pmHey Michael …
I am doing my best to add some new vocabulary to the tech journalist’s lexicon, but sadly ‘founder’ is not a word of my own creation. It’s been around since the 14th century, I believe.
Founder
Main Entry:
1. to become disabled; especially : to go lame
2. to fail utterly; collapse; “The project foundered”
As far as BlockBuster’s proposed acquisition of Circuit City goes, well … I suppose some of CC’s inventory is complimentary to BB. Perhaps there is something here. That said, these deals rarely seem to work out well (Remember Circuit City+Napster?).
Oh, at the time I wrote this post, I hadn’t heard that Icahn was backing the deal. That certainly counts for something. And, yes, he is far better at making money than me.
Posted by John Paczkowski at April 14th, 2008 at 1:06 pmThanks for the language update John. Guess all these years I thought people said “flounder” when what they really said was “founder.” My hearing must have been affected when I got too close to the cannons during the Hundred Years’ war — good thing my “bidness” didn’t depend on it.
Posted by Michael McDonald at April 14th, 2008 at 7:57 pmHa! [spray of coffee jets across monitor]. You aren’t by any chance a commercial fisherman? That might explain your pre-disposition to the word ‘flounder.’
Posted by John Paczkowski at April 15th, 2008 at 9:56 am