The latest pondering out there has the proposed Circuit City (CC) and Blockbuster (BBI) the equivalent to the merger of Sears and Kmart that created Sears Holdings (SHLD). While a nice exercise, it lacks one thing, legitimacy.
For the best analysis of the exercise, read here:
Here is were is falls apart and it does so before it actually get started really. Sears and Kmart did the same thing, retail. Specifically clothing, lawn and garden, electronics, auto and the rest of the big box general retailer gambit. The combination of the two created the nation’s third largest retailer with sales of over $50 billion a year. The combination of BBI and CC will do nothing to increase the size of either in their prospective industries.
Blockbuster rents dvd’s and Circuit City sells them it their stores. They also both…..well…..they don’t do anything else in common. Other that the fact they both have dvd’s in their stores, the two businesses have no similarities at all, other than poor management.
A Circuit City and RadioShack (RSH) merger would be a similar comparison to Sears / Kmart as those businesses are very similar. There would be, in that case, cost savings involved with the merger that could be realized and the two businesses would have selling synergies that could boost results. Also there is the little reality that RadioShack’s Julian Day could out-manage CC’s Phil Schoonver in a coma.
One also has to remember the Sears / Kmart merger has produced a 10 fold increase in shareholder value, does anyone out there actually think a Circuit City / Blockbuster one will produce even remotely similar results? Anyone? Does anyone actually think they will be even profitable considering the debt load necessary to pull off the deal?
Other than the fact that both situations involved two companies merging, there are virtually no other similarities.
Disclosure (“none” means no position):Long SHLD, none
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2 replies on “CC + BBI = Sears + Kmart? Uh, No”
AGREED! what do you think about BAC w/d’ing SHLD’s $1B LOC?? also, what do you make of AZO? You write about ESL increasing their stakes but I’d like to know your thoughts on a SHLD/AZO synergy and also you fundamental analysis of AZO.. thanks!
jud,
i would love to see diehards for sale in azo. even craftsman auto tools…
azp operates in a market of one really considering its size.
i like it