Is Circuit City Stores (NYSE: CC) sending signals that it wants to be acquired? The consumer electronics retailer has posted two dismal quarters recently as well as sending mixed signals on how it plans on handling employee headcount. The retailer's admission that it wants to get rid of 3,400 employees (and re-hire some back as significantly lower pay) and losing a few hundred store managers to attrition while adding new stores sounds like a hodge-podge of confusion to me.
Meanwhile, Best Buy (NYSE: BBY) is wiping its feet on the doormats of Circuit City stores nationwide and the retailer must do something. Even though Best Buy and Circuit City sell essentially the same products, the merchandising and retail finesse Best Buy continues to demonstrate is not being echoed by Circuit City, which blames drastic price reductions in flat-panel televisions as a main driver for quarterly losses as of late. Best Buy? Not so much -- it's making a profit.
With Circuit City shares sitting at the $15.88 mark as I write this, is the consumer electronics retailer ripe for a buyout or acquisition? An acquisition does not make sense, but taking the company off the market just might. As you may recall, Circuit City rebuffed an offer in 2005 from a Boston hedge fund at $17 per share -- and now it's below that and probably not going to rise above $20 anytime soon. With a single share of CC being cheaper than a DVD in one of its stores, would a private equity outfit want to make an offer so that shutting down some stores and renovating others in higher-volume areas could be accelerated? Now may be the time.
Circuit City may be buyout bait
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Reader Comments (Page 1 of 1)
5-31-2007 @ 6:47PM
Ray said...
I tend to agree with your assestment. I live in an area where a new Super Best Buy will soon open. This BB will be across a major intersection from Circuit City. The old BB will close down. It was located further away from the current CC. This new Super BB will devaste the CC close by.
If CC can find a suitor or be closed. It might fair better.
The 2005 offer looks great today. What a loss.
I do not like momopolies. But in a case like this. CC might have bitten off more than it could chew.
Let's see how this unfolds.......