|
Circuit City rejects bid to become private company
Virginia
Business
April
2005
Circuit City has turned down a $3.02
billion buyout offer from one of its major shareholders.
Highfields Capital Manage-ment LP, which owns 6.8 percent
of the retailer’s stock, had offered $17 per share
in a bid to take the company private.
Circuit City’s board of directors
rejected the offer in early March, saying that shareholders
would do better by allowing the company to pursue its
current strategies.
The decision capped a series of recent moves at Richmond-based
Circuit City. In addition to considering the takeover
offer, the consumer electronics retailer decided to
close 19 superstores (including its Lynchburg store),
five regional offices and its 400,000-square-foot distribution
center in Doswell. The company also severed ties with
Amazon.com to focus on its own e-commerce site. Circuit
City also named a new president, Philip J. Schoonover,
and three new top managers.
The offer by Highfields Capital, outlined in a letter
sent by Highfields managers Jonathon Jacobson and Richard
Grubman on Feb. 11, noted their disappointment that
Circuit City’s management “has been unable
to move more aggressively” in addressing the company’s
operating performance and capital structure. Jackson
and Grubman also discussed their plan to take the company
private, a status that would have allowed this former
industry leader to “effect change more rapidly
with fewer constraints.”
Before Circuit City’s board announced its decision,
Stephen Baker, an analyst with NPD Group, said that,
coupled with its recent cost-cutting measures, accepting
Highfields Capital’s offer would be the wrong
solution to the company’s problems.
|
|
