Circuit City settles with shareholder, opens books to suitor
- May 9, 2008
Richmond-based Circuit City has settled a dispute with a dissident shareholder and opened its books to a potential suitor.
Circuit City, once the nation’s leading consumer electronics retailer, has reached an agreement with Wattles Capital Management in which three Wattles nominees will be added to the company’s slate of candidates for the board of directors. Also, one Wattles nominee will become a member of the board’s executive committee.
The deal avoids a potentially costly proxy fight between Circuit City and Wattles, which owns 11 million shares of its stock, 6.5 percent of outstanding shares.
In addition, Circuit City announced that it will allow potential suitor Blockbuster Inc. to look at its books and that it has retained New York investment bank Goldman Sachs “to assist the company in exploring strategic alternatives to enhance shareholder value.”
Blockbuster has made a $6 a share takeover offer for Circuit City, but the companies have fussed over access to Circuit City’s books and proof of Blockbuster’s ability to pay for the deal.
In response to a request from Circuit City, Blockbuster now has provided information about its ability to finance the takeover. Blockbuster’s response included a letter from investor Carl Icahn, a Blockbuster director, saying that he is prepared to buy Circuit should Blockbuster’s proposal fall short.
Philip J. Schoonover, the chairman, president and CEO of Circuit City, cautioned observers about reading too much into the company’s actions. The company’s board, he said, still believes in its current turnaround strategy.
“Let me be clear that our decision to allow Blockbuster and Carl Icahn to conduct due diligence should not be taken as an indication that the board has completed its review of the Blockbuster proposal, that the board has taken a position on the company’s value, or that it has settled upon a particular strategic course of action,” he said in a news release.