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After due diligence Blockbuster decides not to buy Circuit City

Traditional movie stores are feeling pressure from alternate forms of movie rentals. Rental chain Blockbuster has found competition from services like Netflix to be stiff. To combat the loss of customers to Netflix and similar services, Blockbuster launched its own web-based rental service.

Blockbuster has been looking intently for ways to improve the profitability of the company and has been offering movies for sale in its stores and special bundles of games and game consoles as a way to get customers into its retail stores.

In April 2008, Blockbuster made an offer to buy Circuit City at $6 to $8 per share, amounting to as much as $1.35 billion. At the time Blockbuster made its intention to pursue the purchase of Circuit City, it also noted that management of Circuit City had failed to provide Blockbuster with the due diligence it needed to make a definitive proposal to purchase the company.

In May of 2008, Circuit City finally opened its books to Blockbuster to allow it due diligence to make the decision to purchase or not. Today Blockbuster announced that it is withdrawing its proposal to purchase Circuit City.

"Based on market conditions and the completion of our initial due diligence process, we have determined that it is not in the best interest of Blockbuster's shareholders to proceed with an acquisition of Circuit City," said Jim Keyes, Blockbuster Chairman and CEO. "We continue to believe in the strategic merits of a consumer retail proposition that would bring media content and electronic devices together under one brand. We will pursue this strategy through our Blockbuster stores as a way to diversify the business and better serve the entertainment retail segment."

Circuit City has not commented on the withdrawal of the proposed purchase at this time.





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