UPDATE 3-Circuit City to open its books to Blockbuster

(Adds comment, stock rise)

By Karen Jacobs

ATLANTA, May 9 (Reuters) - Circuit City Stores Inc (CC.N: Quote, Profile, Research) on Friday reversed course and said it would open its books to suitor Blockbuster Inc (BBI.N: Quote, Profile, Research) and the movie-rental company's largest shareholder, billionaire investor Carl Icahn.

The electronics chain also said Goldman Sachs Group (GS.N: Quote, Profile, Research) is assisting it in exploring strategic options, and announced an agreement with investor Mark Wattles that effectively ends a proxy fight ahead of its June annual meeting.

The electronics retailer's shares climbed more than 8 percent.

Last month, Blockbuster disclosed that in February it had offered to acquire Circuit City for $6 a share to $8 a share, or up to $1.3 billion. Circuit City responded that while it was open to pursuing talks, it was unwilling to let Blockbuster see its books, citing concerns about financing.

On Friday, Circuit City said the movie-rental company had provided additional information that included a letter from Icahn stating that, subject to being satisfied with his due diligence review, the activist investor and affiliates would "stand ready" to purchase Circuit City if Blockbuster were unable to arrange financing.

Blockbuster had indicated in a letter to Circuit City that it planned to withdraw its bid if it had not been granted the opportunity to begin due diligence by April 28, according to a regulatory filing.

Richmond, Virginia-based Circuit City, which became the focus of takeover rumors as its results weakened in the past year, said the decision to open its books "should not be taken as an indication" that it has completed its review of the Blockbuster bid or settled upon a specific course of action.