Blockbuster Goes After Circuit City

Movie renter Blockbuster (BBI Quote - Cramer on BBI - Stock Picks) has offered to acquire consumer-electronics seller Circuit City (CC Quote - Cramer on CC - Stock Picks) for at least $6 a share, but thus far the target company hasn't shown much interest.

Blockbuster said it detailed the proposal in a letter to Circuit City Chairman and Chief Executive Philip Schoonover on Feb. 17. To this point, Circuit City "has failed to provide due diligence necessary to allow Blockbuster to make a definitive proposal," Blockbuster said.

Therefore, Blockbuster decided to make its offer, which could go as high as $8 a share, known to the public. Shares of Circuit City were surging 56% to $6.09. Blockbuster was sinking nearly 14% to $2.70.

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Blockbuster's offer comes as both it and Circuit City are struggling to keep up with increasingly tough competition. Blockbuster now offers a movies-by-mail option, along with its traditional stores, in order to offset the impact of Netflix (NFLX Quote - Cramer on NFLX - Stock Picks), while Circuit City has seen Best Buy (BBY Quote - Cramer on BBY - Stock Picks) emerge as the option of choice for consumer electronics.

"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," Blockbuster Chairman and CEO Jim Keyes said in a statement. "We believe the combination will result in a compelling consumer proposition that will drive significant revenue and margin enhancements, as well as cost synergies."