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Circuit City: Firm makes offer to buy, take company private

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Circuit City: Firm makes offer to buy, take company private

Old 02-15-05, 11:41 AM
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Circuit City: Firm makes offer to buy, take company private

Firm Makes $3.25B Offer for Circuit City

RICHMOND, Va. (AP) - Circuit City Stores Inc. said Tuesday that a Boston investment firm made an unsolicited offer to buy the company for $3.25 billion, or $17 per share, and take it private. Shares of the nation's No. 2 chain of consumer electronics stores soared in morning trading.

Circuit City shares jumped $2.64, or 19 percent, to $16.87 in morning trading on the New York Stock Exchange. The stock has traded in a 52-week range of $10.18 to $17.87.

Highfields Capital Management's cash bid, worth about $3.25 billion, represented a nearly 20 percent premium to Circuit City's share price of $14.23 at the close of trading Monday.

Circuit City said its directors will "carefully" evaluate the proposal, as well as other available alternatives. It has retained Goldman Sachs as an adviser, while Highfields is being advised by UBS Investment Bank.

Bill Cimino, a Circuit City spokesman, said the company would have no comment outside of its prepared statement.

Highfields did not immediately respond to a telephone message left Monday. The fund is known for being a vocal advocate for shareholder interests. It has exerted heavy pressure on management at a number of companies, including Janus Capital Group and the former Reynolds Metals, which was sold the company to Alcoa Inc.

Highfields owned about 7.8 percent of Circuit City's shares on Feb. 11, the same day Highfields fund managers Jonathon S. Jacobson and Richard L. Grubman wrote a letter to the store's directors expressing their displeasure with the retailer's lagging performance.

In the letter, both men said they believed Circuit City would do better as a privately held business. The managers also raised their concerns in a meeting last week with W. Alan McCollough, Circuit City's chief executive.

"Though some steps have been taken to address the company's operating performance and suboptimal capital structure, we are nevertheless disappointed that management has been unable to move more aggressively," the fund managers wrote. "We attribute this partially to the demands and scrutiny that come with being a public company ... and partially to the company's historical inability to react to the increasing competitive nature of the business."

As a private company, Circuit City "will be able to effect change more rapidly with fewer constraints," the managers wrote.

Circuit City lost $89.3 million on $9.75 billion in sales in its fiscal year ended Feb. 29, 2004. More recently, the company, which trails industry leader Best Buy Co. Inc., reported disappointing holiday sales in part due to heavy promotions.
http://news.moneycentral.msn.com/tic...8&Symbol=US:CC

This wouldn't surprise me. Working the "Best Buy model" hasn't done a thing for them. Not having to be beholden to shareholders could do wonders for the company financially. Just ask companies like Fry's.
Old 02-15-05, 10:22 PM
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i would shop at CC more, but the local one here has nothing in stock. MY dvd collection is bigger than theirs.
Old 02-15-05, 11:37 PM
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I heard that someone who used to work in upper management at Best Buy quit there to work at Circuit City. Is he responsible for this push to go private? I think it would be great if Circuit could do something to be competetive. In the past I've stated that their upper management seemed to have no clue what to do next. Maybe this is the begining of a turnaround.

In a related note, I noticed that some of the managers and supervisors I've come to know at Best Buy have moved on to Circuit City. Most said that there were to many unsettling things going on at Best Buy that they said would sink or swim the company.
Old 02-16-05, 02:45 AM
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When i go to the CC here i see quite a few faces from when i worked at Best Buy. But, I can remember people jumping ship when i still worked at Best Buy.

Then again before i quit BB the managers had boasted that they hired a manager away from CC. But i guess that doesnt matter when it was losing one manager and gaining countless employees over the years.

I'd shop at CC more if they did something about the way thier CD's and DVD's are organized. Half the time i can't find anything with thier setup.
Old 02-16-05, 09:15 AM
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Originally Posted by POWERBOMB
I heard that someone who used to work in upper management at Best Buy quit there to work at Circuit City. Is he responsible for this push to go private?
I doubt it. He may have something to do with them not immediately dismissing the offer as they did last year when someone wanted to buy them.

The sad thing about Circuit City is that when their stockholders watch how much Best Buy has exploded over the last 10 years, they insist that the company immitates them. They can't seem to grasp that it isn't as simple as running color ads in the paper and having a similar staffing structure.

They did announce this morning that they are closing 19 more stores.
Old 02-16-05, 01:45 PM
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The store closings have begun:

http://www.wkyc.com/news/news_fullstory.asp?id=30449
Old 02-16-05, 01:53 PM
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Here's the full list:

Code:
Store Closing List

     Store Name            Address                       City, State

     Bloomington           2520 East 3rd St.             Bloomington, Ind.
     West 38th Street      3670 Moller Road              Indianapolis, Ind.
     Evergreen Plaza       9600 S Western Ave.           Evergreen Park, Ill.
     Randhurst             999 North Elmhurst Road       Mount Prospect, Ill.
     Old Orchard           4831 Golf Road                Skokie, Ill.
     Wichita East          8405 E. Kellogg Drive         Wichita, Kan.
     Pontiac               550 N. Telegraph Road         Detroit, Mich.
     Lansing East          2655 E Grand River Ave.       East Lansing, Mich.
     Southfield            28556 Telegraph Road          Southfield, Mich.
     Traverse City         3123 South Airport Road       Traverse City, Mich.
     Westland              4030 West Broad St.           Columbus, Ohio
     Olmsted               27250 Lorain Road             North Olmsted, Ohio
     North Randall         21639 Miles Road              North Randall, Ohio
     Parmatown             8009 Day Drive                Parma, Ohio
     Jackson               1938 Emporium Drive           Jackson, Tenn.
     Katy Freeway          1045 Katy Freeway             Houston, Texas
     Lufkin                4600 S Medford Drive          Lufkin, Texas
     Lynchburg             3700 Candlers Mountain Road   Lynchburg, Va.
     Northridge            8173 West Brown Deer Road     Milwaukee, Wis.
http://newsroom.circuitcity.com/Rele...leaseID=155982

All listed stores are closed today and tomorrow. Friday, they'll begin their close-out sales.
Old 02-16-05, 02:02 PM
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If all of this weren't bad enough for them, one of their corporate jets crashed today. None of the company's officers were on board.

http://news.yahoo.com/news?tmpl=stor...us/plane_crash

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