Circuit City Stores Inc. has been advised that Blockbuster Inc. cannot complete its bid to acquire the electronics retailer due to the current difficult financing environment.
Circuit City, which is being advised by Goldman Sachs, issued the statement on Wednesday in response to a letter received from Wattles Capital Management, LLC, a Circuit City shareholder that is pressing for management changes. The offer is worth up to $1.3 billion.
Circuit City awaits a viable financing structure that is predictably executable by Blockbuster given its current constraints of size and capital structure before it would be appropriate to allow further due diligence, Circuit City said in a statement.
The company said last week that it had previously reviewed a similar private proposal from Blockbuster, but could not satisfy Circuit City that the proposal could be financed.
Blockbuster, which could not complete the deal privately, made a public offer to acquire Circuit City on April 14 for between $6.00 and $8.00 per share. Shares of Circuit City closed at $4.62 today, falling 2.33 percent, or 11 cents after the company's comments.
Blockbuster, which is attempting to move beyond just renting movies, envisions that the combined companies would benefit from complementary products as media content and electronic devices converge.