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Second Shareholder Group Urges Circuit’s Sale To Blockbuster

4/29/2008 02:18:00 PM Eastern

Dallas — A second major shareholder group is urging Circuit City to open its books to Blockbuster and seriously consider an acquisition by the video chain.

HBK Investments, an investment management firm that controls 9 percent of Circuit City stock and also holds a significant stake in Blockbuster, outlined its rationale for a merger in a Securities and Exchange Commission filing dated yesterday.

The filing also included a letter to Circuit City chairman Phil Schoonover dated April 28, in which HBK echoed most of the arguments put forth in a separate proxy filing by fellow investor Mark Wattles, who has a 6.5 percent position in Circuit City.

“While we can understand the board’s desire to become comfortable with how Blockbuster would specifically finance this transaction, this offer should be taken seriously and Circuit City should immediately provide access to due diligence information and commence good-faith negotiations,” the letter stated.

Circuit’s board and financial advisors, Goldman Sachs, are doubtful that Blockbuster could swing the purchase price, given a market capitalization that is less than half of the billion-dollar-plus offer.

HBK also indicated that it has had, and will continue to have, discussions with Circuit City’s management, fellow stockholders, and other “relevant parties” including Blockbuster concerning the CE chain’s operations, management, governance, strategy and future plans.

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