Circuit City considers alternatives as Blockbuster continues due diligence; proxy fight with Wattles averted

By Lisa Kerner

Charlotte, N.C., May 9 - Circuit City Stores, Inc. said it will explore strategic alternatives for the company with the assistance of Goldman, Sachs & Co.

The company will allow Blockbuster Inc. and Blockbuster's largest shareholder, Carl Icahn, to conduct additional due diligence, according to a Circuit City news release.

It was previously reported that Blockbuster offering in February to acquire Circuit City for at least $6 per share in cash.

"While the Circuit City board has confidence in the company's ability to successfully implement its turnaround plan and generate shareholder value, we believe that we can best serve the interests of our shareholders by exploring all possible alternatives to enhance shareholder value," Circuit City chairman, president and chief executive officer Philip J. Schoonover said in the release.

Schoonover cautioned that despite allowing Blockbuster and Icahn to conduct due diligence, Circuit City has not completed its review of the Blockbuster proposal or settled on a particular course of action.

Blockbuster, in a letter to Circuit City, said Icahn and/or his affiliates are ready to purchase Circuit City if Blockbuster is unable to receive financing or required shareholder approval, subject to satisfactory due diligence.

While Blockbuster said it is pleased with the agreement to conduct due diligence, it is "committed to only doing a transaction that provides substantial benefits" for its shareholders.

Proxy contest avoided

Circuit City also announced it reached an agreement with shareholder Wattles Capital Management, LLC to avoid a proxy contest.

Under the agreement, Circuit City's board will select three of Wattles' director nominees and include them as nominees of the board at the company's 2008 annual meeting. One of the nominees will become a member of the executive committee of the Circuit City board, a company news release noted.

Wattles and its affiliates owning some 11 million shares, or 6.5%, of Circuit City common stock agreed not to solicit proxies in connection with the 2008 annual meeting and to vote their shares in support of all of the board's director nominees.

According to the news release, at least two of Circuit City's current directors will either step down or decline to stand for re-election.

Circuit City is a Richmond, Va.-based electronics retailer.

Dallas-based Blockbuster operates and franchises entertainment-related stores, featuring pre-recorded videos and video games for in-store rental, sale and trade.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.