Still trying to fix its own movie-rental business, the Dallas based company—Blockbuster made a bold move by announcing in a public letter sent to Circuit City’s Chairman of the board that they are planning to acquire Circuit City for $1 Billion to $1.3 Billion. Blockbuster says that they made the letter public because, “it believes the shareholders of Circuit City should have the opportunity to participate in determining the destiny of the company.”

Blockbuster’s offer is larger than its entire market value thus raising doubts on how would its proposal can be financed. On this matter, the CEO of Blockbuster, James Keyes said that financing could be made possible with the help of one of his board members, Carl Icahn to finance the project. Reyes is keeping an optimistic mind that they could get the deal done with the Virginia-based company.

Icahn, the largest shareholder for Blockbuster has not returned any calls for confirmation just yet.

The merging of both companies (for Blockbuster’s part) would yield what Keyes calls, “an $18 billion retail enterprise uniquely positioned for the convergence of media content and electronic devices.” Blockbuster wants to create a 9,300- store chain that would be much like Apple Incorporated stores where people could buy portable devices and entertainment.

Assuming that Circuit City–the second largest consumer’s electronic chain in America accepts Blockbuster’s proposal, the Dallas-based rental provider company plans to offer the current shareholders on buying additional stock to predominantly finance the all-cash bid.

However, as to what is expected of Circuit City Inc., it has not responded to the $1 Billion proposal made by Blockbuster because of the cautions surrounding the offer. “Consistent with its fiduciary duties, the Circuit City Board of Directors, in consultation with its outside legal and financial advisors, will continue to carefully consider and evaluate Blockbuster’s unsolicited proposal,” the company said in a statement. “Circuit City advises shareholders to take no action at this time with respect to the unsolicited proposal from Blockbuster.” In addition to that, Circuit City also said these statements, “To date Blockbuster has been unable to satisfy Circuit City and its advisors that Blockbuster’s proposal could be financed. In particular, Blockbuster’s proposal appears to contemplate a rights offering of unprecedented size relative to the issuing company’s market capitalization and at a price that is at a significant premium to Blockbuster’s current market price. Circuit City’s advisors have noted that most rights offerings, of which there have been very few in the United States, occur at discounts to market.”

Michael Pachter, an analyst from Prolific Wedbush Morgan Securities raised his eyebrows on Blockbuster’s buyout offer. ‘Blockbuster is not thinking through how difficult the big-ticket consumer-electronics business is. It’s pretty audacious … to the point of potentially reckless,” while noting that Circuit City could continuously lose its market shares on its competitor— Best Buy, due to “a worsening economic environment, a well-run competitor, and a constantly changing product offering.”

The stock market closed last Monday with the stocks going down from 10.22 percent to $2.81 for Blockbuster.

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