The Rockethouse

Fail! makes bid to acquire Fail!

Blockbuster made a bid to acquire Circuit City today. I can’t really imagine this being successful. Here’s my reasoning in sexy bullet list format: 

• Seems like old-school business model (brick and mortar movie rental) trying to bail itself out by combining with another old-school business (brick and mortar electronics).
• If blockbuster is really going to introduce a box in the home that streams movies right to your TV, they’re going to experience some channel conflict with their suppliers acquired through circuit city.
• One of Blockbuster’s biggest problems is that they have long leases on a ton of real estate which they can’t get out of. This is much of their $2B in debt. This deal will leave them with MORE real estate they can’t get out of. 
• Blockbuster has a market cap of $617M this morning (down 12% as I’m writing this) and yet they are offering up to $1.8B. This would be financed through issuance of additional stock. Now THERE’s some dilution.

My take: Blockbuster knows they can’t beat Netflix. Rather than try to compete, they are trying to hop into an adjacent market. BBI CEO Jim Keyes was formerly CEO of 7-11. Head down to your local 7-11 to preview BBI’s future.