Shares of most consumer electronics retailers are up after movie-rental chain Blockbuster offered to buy Circuit City Stores for more than $1 billion.
Richmond, Va.-based Circuit City Stores Inc. said it is reviewing the offer, but questioned Blockbuster's ability to finance the deal. Dallas-based Blockbuster Inc. offered at least $6 per share for the company, representing a 54 percent premium to Circuit City's share price at Friday's market close.
Circuit City is facing lackluster sales and an investor group that is pressuring for change.
Stifel Nicolaus analyst David A. Schick wrote in a note to investors on Monday that the deal will be difficult to complete amid the current weak consumer and credit environment.
"We believe combining two companies in the midst of their own necessary and difficult transitions adds significant risk to the transaction working or happening," wrote Schick, who rates Circuit City "Hold."
"While real estate is a big Circuit City problem, we don't think traffic driven by Blockbuster closings would drive much rub-off business," he added.
Circuit City shares rose $1.22, or 31.3 percent, to $5.12 during midday trading. The stock has traded between $3.44 and $19.12 during the past 52 weeks.
Stocks rose across the sector. RadioShack Corp. shares rose 16 cents to $15.44. Conn's Inc. rose 30 cents to $16.66.
One exception was Best Buy Inc. Shares fell 20 cents to $40.98.
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