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Blockbuster is all set to acquire Circuit City, hoping it would become a very huge electronic gadget chain aside from being a global provider of movies and gaming entertainment.
Blockbuster is reportedly willing to bid over $1 billion, larger than the company’s current value in the stock market, to create a chain similar to the Apple Inc.’s stores. Combining the two companies together, a 9,300 store chain will be readily available to sell movies, games, and gadgets to the US. If and when the deal is finalized, Blockbuster movies and games for sale or rental will be carried by Circuit City stores nationwide while Blockbuster stores will also sell electronics and gadgets.
Being the second big box retailer in the country, Circuit City is doubting that Blockbuster could pay the $1.35 billion bid. The movie rental company isn’t that big and is still recovering from last year’s $49 million loss, so Circuit City thinks that it may not be a good idea after all. However, Chief Executive James Keyes is positive that Blockbuster will be able to help Circuit City in an effort to recover and reclaim their number 1 spot as the largest consumer electronics chain in the US, which they lost to Best Buy in the early 1990’s.
Analysts says that this move by Blockbuster is unwise. Wedbush Morgan Securities Michael Pachter said:
Pachter believes that the two companies could continue to lose their market share to the biggest rival and stump Blockbuster’s own recovery.
On the other hand, Keyes is still positive that the pending acquisition would be good for the two companies because since he joined Blockbuster, the company has been seeing a dramatic increase in sales. To date, no official announcement was made yet by Circuit City but its shareholders were already advised to “take no action until the company board reviews the bid” according to a report by Chicago Tribune.
Read [Chicago Tribune]
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