Buyout offer for Circuit City
US retailer gets private equity approach
Circuit City, the number two specialist electronics retailer in the US, has received a takeover approach from private equity Highfields Capital Management.
Highfields, which already owns about 8 per cent of Circuit City shares, has written to chief executive W Alan McCollough, proposing a $3.3bn offer. The deal would take the business private, which Highfield argues would put it in a stronger position to compete.
Circuit City, which operates 630 stores, has struggled since losing the number one specialist slot to rival Best Buy some years ago. Wal-Mart also sells more consumer electronics products.
The business is halfway through a four-year revitalisation campaign started by McCollough, who dropped the poorly performing home appliance business, increasing space for CDs, DVDs and video games, and has relocated stores to newer shopping centres.
In the year ended in February 2004, Circuit City’s sales fell 2 per cent, to $9.75bn, and it posted a loss of $89.3m. Overall US electronics sales rose 2 per cent lasy year, according to trade group the Consumer Electronics Association.
In the wake of the approach, Circuit City has announced the closure of 19 superstores, five regional offices and a distribution center by the end of this month.
