Blockbuster reassures investors, stock up

By Sue Zeidler

LOS ANGELES (Reuters) - Shares of Blockbuster Inc BBI.N rose nearly 10 percent on Tuesday after the company was said to have assured investors it would only acquire Circuit City Stores Inc (CC.N: Quote, Profile, Research) if it added to earnings, analysts said.

"I think they've softened their stance a little bit and are allaying fears by telling investors they'll only do a deal that seems rational and provides them with synergies that will give them both near- and long-term returns," said Arvind Bhatia, an analyst with Stern Agee, who said Blockbuster discussed its Circuit City plans in New York.

Officials from Blockbuster, the biggest U.S. movie rental chain, were not immediately available for comment.

The company's shares rose 27 cents, or 9.6 percent, to $3.07 a share on the New York Stock Exchange.

Another analyst, who declined to be identified, said he had also heard Blockbuster executives met investors on Tuesday.

"I heard they met with a bunch of big shareholders and told them they'd only pursue Circuit City if it was hugely accretive and its due diligence supports that," the analyst said.

Shares of Blockbuster, which reports quarterly earnings on Thursday, also got a boost after Citigroup analyst Tony Wible said in a note on Monday that the potential deal could provide Blockbuster with increased revenue and cost savings.

Yet Blockbuster's bid continues to draw skepticism from analysts who question the strategic fit of the two struggling companies just as Blockbuster is staging a turnaround.