Blockbuster could come back for Circuit City?

Citing unnamed sources, The New York Post reports that Blockbuster (NYSE: BBI) could come back to Circuit City (NYSE: CC) to try to acquire the company.

The sources said that Circuit City pulled out because of weakness in the credit markets, but still feel that a deal could have strong long-term benefits. I don't think it makes sense for Blockbuster to acquire the company but, if it does, pulling out for now is probably a good idea. Shares of Circuit City tanked when Blockbuster announced that it was no longer pursuing a deal, and, according to the Post, Best Buy (NYSE: BBY) isn't interested because of antitrust concerns. With few indications that there is anyone else bidding for Circuit City, and the company's fundamentals in a rapid state of decline, it seems like the longer Blockbuster waits the less it will have to pay. Unless another bidder emerges, there's no real rush.

Back in April, Blockbuster made a preliminary proposal to acquire Circuit City "with an all cash offer in the range of $6.00 to $8.00 per share, subject to due diligence." With shares of Circuit City down 9% to $2.32 on Wednesday, Blockbuster could probably get the company for considerably less if it made another offer today.

With Circuit City bleeding cash, continued consumer weakness could make it really cheap on the courthouse steps later this year. Maybe then Blockbuster shareholders would be more supportive of a deal.