Carl Icahn steps in after Circuit City rejects Blockbuster's USD1bn bid

Tue Apr 15 2008, 10:56 AM

Blockbuster shareholder Carl Icahn says he will finance the company's bid for Circuit City Stores personally, after the electronics retailers rejected the USD1bn-plus cash offer unveiled yesterday. Icahn, who owns 16% of Blockbuster class A shares, says he is willing to back up the offer as a guarantee of financial security for the deal. His comments come after Circuit City rejected the buyout offer, citing doubts that Blockbuster would be able to finance the deal. The electronics chain says it will continue to consider the offer.

Deal Details

Video rental chain Blockbuster first submitted its unsolicited bid for Circuit City two months ago, but decided to make it public on Apr 14 to win over shareholders' support. The cash offer, at USD6 to USD8-per-share, is a significant premium on City Circuit stock, which closed at USD3.9 last Friday. However, Circuit City rejected it, saying: "Blockbuster has been unable to satisfy Circuit City and its advisors that Blockbuster's proposal could be financed." Blockbuster said it would generate most of the cash necessary for the merger by issuing additional equity, most probably in a rights offering to existing shareholders.