Circuit City Says In Deal Talks With Two Parties

Circuit City Stores Inc said on Friday that it was in deal talks with two parties that could either buy the bankrupt electronics chain or provide additional financing.

Mexican retail and media mogul Ricardo Salinas Pliego, who has built up a stake of at least 28 percent in the company, is conducting a thorough analysis of Circuit City, his spokesman said.

Circuit City gave no details on its negotiating partners, but said the parties had substantially completed due diligence and now were in negotiations to finalize a deal. The retailer's shares surged 44 percent to 23 cents.

"The fact that they pointed out that there were two potential bidders ... I think there's a decent chance that the company gets sold," said FTN Midwest analyst Anthony Chukumba.

Circuit City, which filed for Chapter 11 bankruptcy protection in November, said it had liquidated and closed 155 U.S. stores in November and December.

Earlier this week, Circuit City filed a motion with the Bankruptcy Court for the Eastern District of Virginia seeking approval of procedures that would formally put the company up for sale. The court made the motion public on Friday and plans to hold a hearing on it later in the day.

According to the motion, an auction of the company and its assets could start on Tuesday, with a sale hearing on Jan. 16.

Circuit City received final approval last month for $1.1 billion in financing to provide liquidity as it reorganizes.

In late December, a Circuit City lawyer told the bankruptcy court that since the Chapter 11 filing, same-store sales had fallen 43 percent to 50 percent at stores that were not slated to close, worse than the retailer had expected.

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