What Happens Next For Circuit City?
With Blockbuster last week dropping its bid to acquire Circuit City for $1 billion, the CE retailer faces an uncertain future. It could be sold to another company, purchased by a private equity firm or firms, it could enter bankruptcy, or it could even be revived under its current leadership, which has been touting a turnaround plan.
Investor Mark Wattles said recently that the company had three suitors, one of whom was presumably Blockbuster; it is uncertain who the others were. But one thing that won’t happen is an acquisition by rival Best Buy. According to a Dow Jones newswire story Monday, the nation’s top CE retailer has no interest in buying out its competitor. Best Buy prefers to focus instead on overseas expansion, as its deal to buy a stake in European retailer Carphone Warehouse closed last week. Antitrust concerns are another reason Best Buy has shied away from the bidding.
Meanwhile, BusinessWeek reported last week that bankruptcy “may be in the offing” for Circuit City, citing industry analysts. Even if the company is purchased by a private equity suitor, such a deal could take place through a Chapter 11 reorganization plan, which would allow the buyer to escape leases in underperforming locations.