Blockbuster withdraws plan to acquire Circuit City

Because of the market conditions the past few years, Blockbuster announced that it is going to withdraw its proposal to buy Circuit City. Chief Executive James Keyes said that the proposal deal, a price of $1 billion, made no economic sense due to the market conditions. Keyes also announced that Blockbuster will merge movies and games with the sale of electronic devices under one roof, but it will be Blockbusters own stores.

Blockbuster stocks have fallen since April, by 20%. The shareholders stocks have dropped below $3 from its peak near $31 in May 2006. Many investors are skeptical of the marriage between Blockbuster and Circuit City because both companies lost money last year. Circuit City reported that its loss tripled and same store sales plunged 11% in the quarter that ended May 31, 2008. Best Buys profit also declined by 7% last quarter ending May 31, 2008 (losing $85 million last year on revenue of $5.54 billion). After the announcement Circuit City’s shares dropped 34 cents, or 11.8% and Best Buy’s shares rose 27 cents, or 11.6%.