- The Washington Times - Saturday, January 10, 2009

Circuit City Stores Inc., which filed for Chapter 11 bankruptcy protection in November, received court permission Friday to auction itself off between two bidders.

The Richmond-based retailer announced that it was engaged in “significant discussions” with “two highly motivated and interested parties” who are considering purchasing the consumer-electronics retailer or providing financing to allow the company to “sustain operations.”

Circuit City, the nation’s second-largest electronics retailer after Best Buy Co., filed a motion in bankruptcy court Monday requesting approval to begin the formal process of putting the company up for sale. The company could be sold as a going concern, it could be broken up into separate business units or its assets could be sold, including its inventory.

The court, which normally requires 20 days before holding a hearing after a motion is filed, expedited matters Friday.

The auction is scheduled for Tuesday, and bids are due Saturday.

The names of the bidders were not disclosed.

Mexican retail billionaire Ricardo Salinas Pliego, who controls a chain of electronics stores in Latin America, already owns a 28 percent interest in Circuit City. One analyst thinks he could make a play for Circuit City.

Mr. Pliego’s ownership stake “buys him a seat at the table,” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consulting and investment banking firm with headquarters in New York City.

“He looks like a real buyer,” Mr. Davidowitz said, while other bidders “could make him pay more.”

Mr. Davidowitz explained that electronics suppliers, who are some of Circuit City’s biggest creditors, might agree to a sale that would yield less than the company’s liquidation value if it meant Circuit City could survive as a going concern and continue distributing their products. They worry about becoming too reliant on Wal-Mart to sell their goods, he said.

“The Mexican billionaire would be a strategic buyer,” Mr. Davidowitz said. “He’s in the electronics business, and he’s already buying from Circuit City’s suppliers. The key is to get someone who knows what he’s doing and can write a check.”

Noting that the two interested parties have “substantially completed due diligence,” Circuit City cautioned: “While the company is optimistic that a transaction can be successfully finalized, no assurance can be given that this will occur.”

If no agreement is reached to sell Circuit City as a going concern or if the auction does not result in the sale of the firm’s assets, Circuit City’s motion said the company may quickly liquidate.

The only other short-term option would be for creditors to amend the debtor-in-possession financing agreement that provided the company with $75 million to keep operating.

Circuit City’s case has been put on the fast track because holiday sales were sluggish and the bankrupt retailer received less than expected from last year’s sale of 155 stores.

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