Richmond, Va. - Circuit City's board of directors rejected a takeover bid last week by Mexican billionaire Carlos Slim Helu.
The Slim family, which owns CompUSA and a 9.2 percent stake in Circuit City, among other interests, offered to pay $8 a share for the balance of the retailer's stock, which had been trading at $6.75. An alternative proposal called for merging Circuit City with certain Slim-held businesses and issuing shareholders cash and stock in the combined company.
According to a filing by the conglomerate with the Securities and Exchange Commission this morning, a Slim family representative telephoned Circuit chairman/CEO Alan McCollough on June 16 with the proposal. Two days later McCollough relayed the board's refusal to enter into discussions with the retail and telecommunications giant.
A Slim spokesman told Reuters that the family may now consider upping its offer or acquiring as many of Circuit's 205 million outstanding shares as allowed by law. He added that 'it could be interesting to form synergies with CompUSA.'
News of the offer sent Circuit City shares up over 9 percent this morning to $8.90. Despite the CE chain's current financial woes, analysts interpreted the board's rebuff as a show of support for McCollough and his plans to re-invigorate the business.
The Slim family is Circuit City's second-largest shareholder after American Express Financial Corp. It's retail arm, Grupo Sanborns, is a turnaround specialist that stabilized CompUSA after acquiring it in 2000 and resuscitated Sears' floundering Mexico-based stores which it bought from the mass merchant in 1997. In both instances, the company applied the same 'operational philosophy' of cutting costs, boosting productivity, closing or refocusing stores and changing management.