Blockbuster offers $1 billion for Circuit City

The video rental chain bids an unsolicited $1 billion to $1.3 billion. The struggling consumer electronics retailer says it is still evaluating the proposal.

Video rental giant Blockbuster on Monday announced it has offered to purchase Circuit City Stores for $6 to $8 per share, or about $1 billion to $1.3 billion.

Blockbuster initially made the proposal on February 17, but says Circuit City has not provided the due diligence it needs to make a more definitive offer. On Monday, Blockbuster decided to go public. In a letter to Circuit City CEO Philip Schoonover, Blockbuster CEO Jim Keyes notes that the two companies have been discussing proposed tie-ups since December.

Blockbuster

Blockbuster says the offer is intended to "capitalize on the growing convergence of media content and electronic devices."

"Our proposal offers Circuit City a significant premium to its existing stock price and creates a game-changing retail concept with a sustainable competitive advantage. We believe the combination will result in a compelling consumer proposition that will drive significant revenue and margin enhancements as well as cost synergies," Keyes said in a statement.

Circuit City issued its own statement saying it had received the offer, and was still evaluating its options.

A combination of the two companies would add up to an $18 billion business, according to Blockbuster's calculations. Both companies have struggled in the past year--Circuit City posted a $200 million loss near the end of 2008 , and Blockbuster has been fending off Netflix's success in online video rentals, as well as the growing threat of digital movie downloads .

Last week news leaked out that Blockbuster had a set-top box under development that would stream video content directly into homes, which was seen by many as a last-ditch effort to adapt its business.

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