It’s understood that if you stick two bricks together, they still don’t float. Blockbuster (BBI) seems to have finally come to that conclusion: they are scrapping any plans to purchase Circuit City (CC).
Shareholders, already unamused by the retail chains’ recent anemic performance, were unenthused by the potentially disastrous deal. BBI shares had initially jumped 4% last week on rumours of BBI abandoning the deal. Now that the deal is officially dead, the stock is surging up 12% in pre-market trading. Circuit City is trading down 14% in the pre-market.
Blockbuster blamed worsening “market conditions” for the failure of the $1 billion deal to come together. Angry shareholders couldn’t have helped either. BBI even went so far as to assure investors the company wouldn’t buy CC unless it made them money (really? thanks). And when your market cap is now under $500 million, every penny counts.
Blockbuster CEO Jim Keyes professed strong belief in the strategy to pair “media content and electronic devices together under one brand” and will pursue that through Blockbuster’s existing stores. Good luck with that. We know we always like to twin our $5 rentals with iPods and Blu-ray players.
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