July 2, 2008, 12:00 AM

Blockbuster pulls its bid for Circuit City

Blockbuster is no longer trying to purchase Circuit City Stores. Instead Blockbuster plans to move aggressively into the digital entertainment distribution business, but will focus on doing so in its own stores and on its web site.

Mark Brohan

Research Director

Blockbuster Inc. is no longer trying to purchase Circuit City Stores Inc.

In April, Blockbuster, No. 35 in the Internet Retailer Top 500 Guide, offered to pay $1.3 billion for Circuit City, No. 16.

But Blockbuster now says a potential takeover of Circuit City is no longer in its best interest. Blockbuster also reiterated its previous announcement that it plans to move aggressively into the digital entertainment distribution business, but said it will focus on doing so in its own stores.

"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,” says Blockbuster CEO Jim Keyes. “We will pursue this strategy through our Blockbuster stores as a way to diversify the business and better serve the entertainment retail segment."

Earlier this year Blockbuster announced an interactive kiosk pilot program at some of its stores. It signed a testing agreement with NCR Corp., which develops kiosk and point-of-sale systems for the retailing industry, and added that it was in discussions with other manufacturers of web-enabled handheld devices.

With the Blockbuster deal off the table, Circuit City will continue to explore other strategic alternatives, the company says.

"Our exploration of strategic alternatives is intended to serve the interests of our shareholders by considering every possible alternative to enhance shareholder value,” says Circuit City CEO Philip J. Schoonover. “The board`s review was not dependent on Blockbuster`s participation and the board has not established a deadline for completing the review."

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