A loser wants to buy a loser?
By TheWild1 at 16 April, 2008, 12:01 am, Categories : Financial Markets
What happens when a loser wants to buy a loser? You get Blockbuster (BBI) wanting to acquire Circuit City (CC).
As if Blockbuster wasn’t going through enough troubles themselves, now they want to pick up the baggage of another suffering company for an estimated $1 billion. Both companies are getting dominated by Netflix and Best Buy in their respective categories. On top of that, Blockbuster is 60% off its 52 week high.
Why does Blockbuster want to buy Circuit City you ask?
Their goal is to merge the two horrible brands together, in order to form the world’s worse electronic gadgets/rent movies and games chain. If the deal was to go down, then the largest Circuit City stores would include a rental section and Blockbuster would make some room for gadgets.
So I guess the conversation would go something like this:
Guy in need: I need a new IPOD. Where should I go?
Blockbuster shareholder: Hit the closest Blockbuster.
Guy in need: They sell IPODS?
Blockbuster shareholder: Yeah and while you are their don’t forget to pay your late fee.
There is such a stigma on Blockbuster that I don’t think many people would choose them for their gadget needs; moreover, no one would go to Circuit City to rent movies. Lot of people don’t even go there to BUY movies.
The $1 billion offer is more than Blockbuster’s entire stock market value; however, the company told people to rest assure because the financing was in place, although Mr. Carl Icahn was unavailable to speak… yeah I’d be embarrassed too.
The main problem with this deal is that Blockbuster is just now trying to turn around its own business. I don’t see how purchasing Circuit City (a chain with its own problem) can fit in their plan to succeed. Now they have been downgraded and abandoned much of its online rental business. Could Blockbuster be going through an identity crisis?
A disgruntle marriage is sure to take place (if it goes down), and I wouldn’t touch them even if they gave me shares (although I could reconsider). SELL, SELL, SELL!
;
No comments yet.