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Blockbuster Tries For Circuit City

Blockbuster has offered to acquire Circuit City for at about $1 billion, they announced Monday.

The offer was made in a letter sent to Circuit City Chairman and Chief Executive Officer Philip Schoonover on February 17 on behalf of the Blockbuster Board of Directors, which fully supports the offer.

Circuit City has not responded to the offer, prompting Blockbuster to make the proposal public.

In a press release, Blockbuster says it is doing so "because it believes the shareholders of Circuit City should have the opportunity to participate in determining the destiny of the company."

"In addition, as Blockbuster has other strategic opportunities, its offer is conditioned upon timely commencement of the due diligence process."

The combination of the two companies would result in an $18 billion global retail enterprise.

Blockbuster argues the transaction would allow both companies to benefit from the revenue growth generated by their complementary products, while the resulting synergies would substantially improve consolidated financial performance, thereby increasing shareholder value.

Blockbuster Chairman and Chief Executive Officer Jim Keyes said, "Our proposal offers Circuit City a significant premium to its existing stock price and creates a game-changing retail concept with a sustainable competitive advantage. We believe the combination will result in a compelling consumer proposition that will drive significant revenue and margin enhancements as well as cost synergies."

Keyes said that Blockbuster expects a net income of $30 million for the first quarter, compared to a net loss of $49 million for the first quarter of 2007.