Blockbuster launches $1bn bid for Circuit City

Video rental firm signals intentions to takeover number two US electronics retailer
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Blockbuster has launched a bid for US retailer Circuit City worth more than $1 billion, with the video rental firm suggesting that potential synergies between the companies could help them compete more efficiently with the likes of Best Buy and Apple's retail operations.

Blockbuster's chief executive James Keyes claimed that the combined company, which would sell both DVDs and games and the devices required to play them, would be well placed to take advantages of the synergies an all-in-one shop would allow.

The two companies had previously been in discussions with a view to Blockbuster making a bid, but discussions stalled after Circuit City's board raised concerns about the video rental company's ability to raise the necessary finance.

Making public his company's intentions to bid, Keyes said that its offer was "a significant premium" and would result in "a game-changing retail concept with a sustainable competitive advantage."

However, it isn't just Circuit City's board that have raised concerns over the bid, with BMO Capital Markets analyst Jeffrey Logsdon saying: "We fail to understand the strategic value of the company's hostile bid for Circuit City," warning that the bid could distract Blockbuster's board from effecting continued improvements to its operations.

Circuit City is the second largest consumer electronics retailer in the US with more than 680 stores. Rival Best Buy, which overtook it in the mid-90s as the US' largest electronics chain, has 935 stores.

Source: AP

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