AFI BLOG: Media and Technology

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Depending on how you look at it, they’re either doubling down on brick and mortar or waving the white flag on their core business… Video rental chain Blockbuster (NYSE: BBI) says it has made a $6 per share all-cash buyout offer for electronics retailer Circuit City, but that its efforts heretofore have been rebuffed. The price, which comes to over $1 billion, represents a 54 percent premium to Friday’s close of $3.90. Blockbuster says it first sent a letter to Circuit City boss Philip Schoonover back in mid-February, outlining the rationale for the deal, but that since then it hasn’t been given the opportunity to conduct necessary due diligence. The letter also noted that Blockbuster could conceivably go as high as $8 per share for the offer, pending the opportunity to analyze Circuit City in greater depth.

In a statement, Blockbuster touts the opportunity for the combined company to take advantage of the “growing convergence of media content and electronic devices”, while also reducing cost savings. Reducing store footprint could be the big play here. It was recently reported that Blockbuster was interested in a set-top box offering, a la Netflix (NSDQ: NFLX), but to some extent, Blockbuster has retrenched from direct competition with Netflix, opting instead to get the most out of its physical locations. Were the rental giant to merge with the consumer electronics chain, it would mark a significant moment in the death of the standalone video rental store. The big box electronics retailers are already in the DVD selling business, so for Circuit City, this would let them rent out discs as well.

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