After months of resistance, retailer Circuit City opened up its books for Blockbuster to complete the process of due diligence to acquire the consumer electronics retailer.
Blockbuster made a public offer in April of up to US$1.33 billion to buy Circuit City, in a deal that would allow the movie rental company to put media content on electronic devices. Blockbuster offered $6 to $8 per share in cash for Circuit City, depending on the results of a check of Circuit City's books.
The acquisition could also put Blockbuster, which rents movie DVDs online and through its stores, in a better position to compete with Netflix, which rents movies online.
Blockbuster made an initial cash offer to buy Circuit City in February, but Blockbuster wasn't allowed to perform the due diligence necessary.
Merging with Circuit City would create an $18 billion global retail company and substantially improve the financial performance of the two companies, Blockbuster has said.
But if Blockbuster were unable to receive financing or shareholder approval for the deal, Carl Icahn, Blockbuster's largest shareholder, said in a letter to Circuit City that he stands ready to buy the company.
While it is a step forward, opening up the books doesn't mean a deal is close to completion, said Circuit City CEO Philip Schoonover in a statement.
"Let me be clear that our decision to allow Blockbuster and Carl Icahn to conduct due diligence should not be taken as an indication that the board has completed its review of the Blockbuster proposal," Schoonover said in the statement. Instead, the company is considering all options to enhance shareholder value, the company said.
Circuit City Stores has hired Goldman Sachs to explore "strategic alternatives," the company said. To gain full support of the board and shareholders, the company is trying to avoid conflicts with them.
On Friday, the company announced it had reached a deal with shareholder Wattles Capital Management to "avert a proxy contest" while the board explores alternatives.
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