SAN FRANCISCO Blockbuster Inc BBI.N on Tuesday abandoned its offer to buy electronics retailer Circuit City Stores Inc (CC.N), after weeks of investor speculation that the deal was falling apart.
Shares of the video rental chain jumped more than 7 percent in extended trade after the news. Circuit City's shares fell 1.6 percent, after declining nearly 12 percent at Tuesday's close.
Blockbuster's Chief Executive Jim Keyes cited "market conditions" as a reason for withdrawing its offer, valued at up to $1.3 billion, and said the deal was not in the best interests of its shareholders.
In a brief statement, Keyes said the company, which is in the middle of turnaround efforts, continues to believe in the "strategic merits of a consumer retail proposition that would bring media content and electronic devices together under one brand."
But Blockbuster would now use its stores "as a way to diversify the business and better serve the entertainment retail segment," Keyes said.
Blockbuster in April disclosed that it had offered to buy Circuit City in February for $6 to $8 a share, or up to $1.3 billion.
(Reporting by Anupreeta Das in San Francisco and Nichola Groom in Los Angeles, editing by Phil Berlowitz and Carol Bishopric)