• Profit at electronics retailer Best Buy Co. (BBY) fell 77% during the company’s fiscal third quarter ended Nov. 29. The company said it would offer buyout packages to nearly all corporate employees to save on costs as it trudges through a dismal holiday shopping season, the Associated Press reported.

• Goldman Sachs Group Inc. (GS) reported a $2.12 billion, or $4.97 a share, loss for its fiscal fourth quarter, Bloomberg reported. “Our results for the fourth quarter reflect extraordinarily difficult operating conditions, including a sharp decline in values across virtually every asset class,” Chief Executive Lloyd Blankfein said in the statement.

• New building permits and new housing starts hit a record low in November. Permits plummeted 15.6% to 616,000 units from 730,000 in October. Housing starts fell 18.9% to 625,000 from 771,000 in October, Reuters reported.

• Retail sales in Brazil rose 10.1% in October, exceeding economists’ forecasts and showing promise that consumers in the Latin American titan are holding up in the global economic slowdown. Sales may slow in November and December, however. “Sectors that are dependent on credit, such as vehicles, will suffer more in the following months,” Luiz Goes, partner of Gouvea de Souza consultancy firm, said in a Bloomberg Television interview.

• Berkshire Hathaway Inc.’s (BRK.A, BRK.B) HomeServices of America yesterday (Tuesday) purchased a Raleigh, N.C.-based York Simpson Underwood, a residential real estate brokerage with 250 agents. York Simpson, which closed more than $717 million in real estate transactions last year, will be merged with an existing HomeServices brokerage, Prudential Carolinas Realty, and is being renamed Prudential York Simpson Underwood Realty, The Associated Press reported.

• Light, sweet crude for January delivery fell 91 cents to settle at $43.60 a barrel on the New York Mercantile Exchange yesterday (Tuesday), despite indications that the Organization of Petroleum Exporting Countries is gearing up to cut production. Prices fell below $44 just after Saudi oil minister Ali Naimi said production would likely be cut by about 2 billion barrels per day.

Source: Global Investing Roundups Wednesday, December 17th, 2008

After a private bid went unanswered, Blockbuster made an unsolicited $1 billion acquisition bid for wounded electronics retailer Circuit City Stores Inc. (CC) for at least $6 a share – a move that sent Circuit City’s shares up 60% in pre-market trading Monday.

Blockbuster said it first approached Circuit City Chairman and Chief Executive Officer Phillip Schoonover with the offer on Feb. 17, but when the movie-rental giant didn’t get a response, Blockbuster decided to take its proposal public “because it believes the shareholders of Circuit City should have the opportunity to participate in determining the destiny of the company.”

However, Blockbuster already has an outline with regard to what that “destiny” would be: The merged companies would create a $18 billion retail enterprise that would benefit from their complementary products, marketing, distribution and financial synergies.

“Our vision for the ‘new’ Blockbuster is to be the most convenient source for media entertainment,” Blockbuster Chairman and Chief Executive Officer James Keyes wrote in a letter to Schoonover.

A Blockbuster Deal for a Browbeaten Market

Circuit City is the second-largest electronics chain in the United States, but the company has struggled recently. Over the past year the company has slashed retail management positions, eliminated jobs at its corporate offices and laid off 3,400 retail workers.

Making matters even worse: Circuit City not only lost more market share to industry leader Best Buy Co. Inc. (BBY), on March 28 it lost its spot in the Standard & Poor’s 500 Index.

Blockbuster hasn’t faired much better. Once an innovative icon in family entertainment and a cornerstone in the realm of media distribution, Blockbuster has more recently been the victim of increased competition and such technological changes as “video-on-demand” that have threatened its business. So it’s cut marketing costs and shed unprofitable customers in a desperate bid to fend off the Internet-based Netflix Inc. (NFLX).

The company’s troubles have led some – including Circuit City – to question whether or not Blockbuster even has the capital to follow through on its $1 billion all-cash offer.

“To date Blockbuster has been unable to satisfy Circuit City and its advisers that Blockbuster’s proposal could be financed,” Circuit City said in a statement.

The statement also questioned whether the proposed acquisition would require debt financing (and, if so, what the terms and structure would be) and how large a rights offering would be required to fund the transaction.

In a conference call, Blockbuster’s Keyes said the company has the support of billionaire board member Carl Icahn.

Presuming Blockbuster does indeed secure the proper financing, Louis Basenese, an mergers and acquisitions (M&A) expert and the editor of The Takeover Trader newsletter, said the deal bodes well for both companies, but mainly because independently, they are headed for the trash heap.

“This is clearly a merger to fight off extinction,” Basenese said. “Combining forces might only delay the inevitable.”

Technology business blog, the Digital Home, called Blockbuster’s proposal “laughable.”

“Blockbuster is nothing more than an irrelevant shadow of its former self. For years, the company stood atop the rental business and destroyed any and all competitors in its path,” Digital Home author Don Reisinger wrote. “But once Netflix saw it fit to change the way the rental business works, Blockbuster couldn’t adapt and its once booming business turned into an overpriced cesspool of old business models.”

A 2008 M&A Revival

A recent report from Thomson Financial indicated that the global volume of M&A plunged 31% to $661 billion in the first quarter of 2008. But that drop-off comes after a banner year for M&A activity. Total global deal volume checked in at $4.5 trillion in 2007, up 24% from the previous high-water mark set in 2006.

Since then, credit conditions have tightened significantly as many banks were badly burned by credit defaults. But while an era of “easy money” has come to an end, there is still ample opportunity for takeovers and tie-ups.

Basenese attributes most of the drop-off in M&A to a shift in the balance of power. Over the past several years, private equity firms had established themselves as the main drivers behind M&A activity by outbidding companies for assets.

However, it was those same buyout firms that led to the collapse in first quarter deals, with a 77% drop in acquisitions. And that has opened the door for companies flush with cash to get back down to business.

“Corporations are sitting with almost near record amounts of cash on their balance sheets,” Basenese said. And with that, they can “take advantage of the depressed stock prices of competitors without the fear of being outbid by overly aggressive private equity shops.”

Deals on the Docket

Microsoft made its move with an unsolicited $44.6 billion bid for Internet portal operator Yahoo! Inc. (YHOO). So far, Yahoo has done its best to thwart Microsoft’s advances, but most analysts believe Microsoft will get its way if it ups its $31 a share offer.

If that buyout goes through, it will be the largest-ever acquisition in the high-tech sector, exceeding even Kohlberg Kravis Roberts & Co.’s $26 billion buyout of First Data Corp. However, Yahoo’s explicit opposition to the takeover makes it impossible to rule out a narrow escape.