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Non-Tech : Bill Wexler's Trading Cabana -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (3442)	4/14/2008 10:51:09 AM
From: RockyBalboa	Respond to of 6370

Blockbuster's Boneheaded Bid for Circuit City Posted Apr 14, 2008 10:27am EDT by Aaron Task in Investing, Electronics, Media, Venture Capital, M and A, IPOs Related: BBI, CC, BBY, NFLX, TIVO, AAPL, AMZN A Monday merger is not unusual, except when it's a proposal like Blockbuster's bid for Circuit City. First, when the headlines hit the tape this morning, many people (myself included) assumed the company bidding for Circuit City was Best Buy, which shows just how far out of left field came Blockbuster's offer. Second, Blockbuster believes combining the two companies will create a "global retail enterprise uniquely positioned to capitalize on the growing convergence of media content and electronic devices" -- never mind that Blockbuster has been losing ground to digital media outlets like Netflix and TiVo, while Best Buy has been eating Circuit City's lunch in the electronics retail space, which is bound to come under even greater pressure as the consumer retrenches. Third, Blockbuster's $6 to $8 per share bid is all cash, and values Circuit City at $1 to $1.35 billion, which is well above Blockbuster's market cap and $185 million cash position. Blockbuster believes its current shareholders will finance the deal via a rights offering. The company says shareholder Carl Icahn has approved the Circuit City bid, but it's hard to imagine many other Blockbuster shareholders will join him. Add it all up and this appears to be one of the more ill-conceived deals in recent history, which is saying something.