April 23, 2008 1:56 PM PDT

Circuit City told Blockbuster can't finance an acquisition

Posted by Erica Ogg

Blockbuster sure sounds like it wants to buy Circuit City, but is it able to?

The financial advisers to Circuit City told company officials Wednesday that they think Blockbuster, which has offered $1 billion for the consumer electronics retailer, doesn't have the proper financing to make good on its bid, according to a Reuters report.

In a statement, the company said, "Circuit City awaits a viable financing structure that is predictably executable by Blockbuster given its current constraints of size and capital structure before it would be appropriate to allow further due diligence."

Blockbuster's CEO said earlier this week that his company would proceed with its takeover effort only if conditions are right and that it is loath to go through with a hostile bid. Circuit City has essentially stonewalled Blockbuster since the initial bid was made in February, not allowing easy access to its books.

Also Wednesday, a Circuit City investor who owns 6.5 percent of the company's stock sent a letter to Circuit City urging the company to open its books to its suitor and begin negotiations. The retailer responded quickly to Wattles Capital Management, issuing a statement reiterating its position that Blockbuster hasn't answered its questions regarding how it plans to finance a deal.