Circuit City (NYSE:CC), which recently reported a $43.9 million first-quarter loss and 8.7% decline in sales, turned down Mexican billionaire Carlos Slim's $8-a-share offer for the company.
As the second-biggest player behind Best Buy (NYSE:BBY) in the consumer electronics market, Circuit City's been attempting to stave off sales weakness and contain its credit card ills. Despite the troubles, however, it wants to keep up the fight alone.
Slim and his family already are the second-largest shareholders of Circuit City, owning 9.2%. When the $8-per-share bid was given on June 16, Circuit City shares were trading at $6.75. The offer valued the company at $1.65 billion.
Slim also owns CompUSA, the Dallas-based computer and electronics chain. His plan for Circuit City would most likely include combining it with CompUSA. Done right, the move could make sense, giving both companies greater distribution and supply networks and improving economies of scale. Further, underperforming stores in both chains could be closed.
Circuit City's board may have shut down the bid, but that doesn't mean that Slim's days are done here. With investors sending shares of the beleaguered company to their highest levels in six months, many are probably hoping that he'll come back with a higher bid.
The market hasn't shown much faith in current management, or its turnaround plans, driving shares down from early 2000 highs of around $60 to current $8 levels. Thanks to Slim, though, it may now be showing confidence in the possibility of new ownership.
