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Highfields Wants Circuit City

RICHMOND, VA-If its bid is successful, the investment firm would take the electronics retailer private.

By Dees Stribling | Updated on February 15, 2005

RICHMOND, VA-Highfields Capital Management, which currently owns about 6.7% of consumer electronics retailer Circuit City Stores Inc., has made an unsolicited bid to buy the chain outright for $17 per share, and take it private. Highfields is a Boston-based investment firm that manages domestic and offshore hedge funds, with total assets under management of over $6.5 billion.

Circuit City has been struggling lately, feeling the effects of stiff competition from electronics specialist Best Buy, as well as discounters such as Wal-Mart. Comp sales for its latest fiscal quarter (ended November 30, 2004) decreased 4.3%, and the company’s market share has been slipping for several years.

The Highfields proposal, contained in a letter dated February 11, was made public by Circuit City this morning. Share prices in the company immediately shot up (as of mid-day Tuesday) as high as $17.25 on trading volume of about six times the daily average of the last three months, possibly indicating that the market thinks an even better offer is in the works. Other investors may be interested because the company is known to have relatively high cash reserves, and relatively low debt.

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