Icahn Billionaire financier Carl Icahn has said he is willing to buy Circuit City if potential bidder Blockbuster Inc. is unable to secure financing.

A sale of Circuit City Stores Inc. could happen sooner rather than later, based on moves made yesterday.

The consumer-electronics retailer said that it reached an agreement with dissident shareholder Mark J. Wattles, that it was opening its books to one potential suitor, and that billionaire Carl Icahn was willing to buy the company if that suitor, Blockbuster Inc., was unable to secure financing.

To settle its fight with the dissident shareholder, the chain will allow three of Wattles Capital Management LLC's proposed nominees, which the retailer had protested, to stand for election to the board of directors at its annual meeting June 24. Circuit City will name just one candidate.

Additionally, James A. Marcum, an executive at merchant banking firm Tri-Artisan Capital Partners who was nominated for the board by Wattles Capital, will join Circuit City's executive committee. Wattles Capital owns 6.5 percent of Circuit City's stock.

Circuit City also will reimburse Wattles Capital up to $700,000 for expenses incurred from the proxy process.

The Henrico County-based chain also said it would allow Blockbuster access to its financial statements.

The Dallas-based video-rental chain went public with a nearly $1.3 billion offer for Circuit City last month, hoping that would force the retailer to open its books. Circuit City balked at the offer, saying it needed proof that Blockbuster could afford the company.

Circuit City also revealed yesterday that billionaire financier Icahn had written the board of directors to say that if Blockbuster was unable to secure financing, he would buy the electronics chain. Icahn, Blockbuster's largest shareholder and a board member, has said he would help Blockbuster finance the purchase.

In a phone interview yesterday, Wattles, president of Wattles Capital, said the upshot of all the action was that Circuit City would be sold in the near future.

Circuit City, however, would not say it was for sale, only that it "was exploring strategic alternatives to enhance shareholder value."

In an e-mail to employees, Philip J. Schoonover, president and chief executive, said strategic alternatives included "a joint venture, strategic alliance, sale or merger, or simply the continued execution of our current business plan."

To help it assess its options, Circuit City has retained Goldman Sachs & Co., which has been working with the electronics retailer for more than a year on the sale of its Canadian unit and has been advising it on issues with Blockbuster and Wattles.

Tom Arnold, a professor of finance at the University of Richmond's Robins School of Business, said Goldman Sachs' presence means the chain is not taking a defensive stance against Blockbuster.

The most likely scenario, he said, is that Circuit City is preparing to present shareholders with a reason to sell at the shareholders meeting.

While sale of the company to Blockbuster or others isn't necessarily inevitable, Circuit City is going to have to make a better case that it is still viable if it's going to stave off pressure from shareholders, BMO Capital Markets analyst Rick Weinhart told The Associated Press.

Wattles and Circuit City's largest shareholder, HBK Capital Management LP, have expressed support for Blockbuster's offer.

Wattles said yesterday, though, that he would be open to looking at offers from other companies. Circuit City is an attractive company and suitors will be interested in buying it, he said.

Arnold said he would suggest that Blockbuster hurry to finalize the deal before someone else swoops in and makes a better offer to shareholders.

"The public doesn't see it, but if you go back and analyze" the company, it can be turned around and made profitable, said Wattles, who owns the 32-store Ultimate Electronics chain. "If not, I wouldn't have written a very large check" to buy the stock. His stake is worth $55.8 million.

Karen Raskopf, a spokeswoman for Blockbuster, said yesterday that the company would begin the due diligence process immediately.

She would not give a deadline, however, saying only "it would be quick and thorough."

Circuit City shares closed yesterday at $5.07, up 28 cents, or 5.85 percent.
Contact Louis Llovio at (804) 649-6348 or LLLovio@timesdispatch.com.