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ILLINOIS BUSINESS LAW JOURNAL A Publication of the Students of the University of Illinois College of Law SPRING 2008 ISSUE, VOLUME 6 Ill. Bus. L.J. | Vol. 6 Please direct all inquires to: Illinois Business Law Journal University of Illinois College of Law 504 E. Pennsylvania Avenue Champaign, IL 61820 [email protected] Page 2 of 251 Ill. Bus. L.J. | Vol. 6 Table of Contents BLOCKBUSTER’S $1 BILLION BID ON CIRCUIT CITY ......................................................... 6 HOME IS WHERE THE MOST ECONOMICALLY BENEFICIAL LAWS ARE: FINDING THE BEST LOCATION TO INCORPORATE YOUR BUSINESS ..................................................... 11 PROBING SPYGATE: WILL THE NFL INDEMNIFY KEY WITNESS? .................................. 16 CYBERBULLYING: A MODERN PROBLEM ........................................................................ 22 PRIMARY DEALERS CREDIT FACILITY: CHANGES FOR MARKET LIQUIDITY ................. 29 IS YOUR AD DECEPTIVE? ................................................................................................. 35 BREACH OF FIDUCIARY DUTY SUITS ARISING OUT OF YAHOO’S REJECTION OF MICROSOFT’S OFFER ........................................................................................................ 41 SEAGATE FILES PATENT INFRINGEMENT LAWSUIT AGAINST COMPETITOR ................ 50 FIDEL CASTRO HAS FINALLY STEPPED DOWN: NOW WHAT SHOULD BE DONE ABOUT THAT PESKY TRADE EMBARGO? ........................................................................ 57 THE ROBERTS COURT AND THE NEUTRALIZATION OF MCCAIN-FEINGOLD’S CORPORATE ...................................................................................................................... 65 WIKILEAKS: A CUTTING-EDGE JOURNALISTIC TOOL OR AN AFFRONT TO BUSINESS PRIVACY? .......................................................................................................................... 81 PATENT REFORM ACT IS CONSIDERED BY U.S. SENATE ............................................... 89 AIRLINE LABOR DISPUTES AND THE RLA STATUS QUO PROVISIONS .......................... 98 ARE YOUR GIFT CARDS SAFE? ...................................................................................... 107 Page 3 of 251 Ill. Bus. L.J. | Vol. 6 THE EXISTING LABOR AND ENVIRONMENTAL AGREEMENTS IN NAFTA ................. 111 WORST. JOURNAL ARTICLE. EVER. [NORTHERN IRELAND COURT OF APPEALS OVERTURNS AWARD TO “GOODFELLAS” PIZZERIA IN BELFAST]............................... 117 SHOULD COMPLEX CORPORATE LITIGATION TRIALS BE LEFT TO THE JURIES? ......... 131 CAN A REASONABLE EXPECTATION OF PRIVACY EXIST IN CYBERSPACE? ................. 138 LAW FIRMS: IT’S GETTING EASIER TO BE GREEN ......................................................... 146 VARYING INTELLECTUAL PROPERTY REGIMES: THE RECEPTION OF GRAY MARKET GOODS IN THE UNITED STATES AND THE EUROPEAN UNION .................................... 155 PRIVACY IMPLICATIONS OF RADIO FREQUENCY IDENTIFICATION TECHNOLOGY .... 168 WHEN IN DOUBT, SEEK A BUYOUT: INDIANA’S SOLUTION TO THE KELVIN SAMPSON DILEMMA........................................................................................................................ 175 HEDGE FUNDS ARE GETTING RICH, BUT WHO IS REALLY TAKING THE RISK? ............. 182 PAYDAY LENDERS: LURING THE ELDERLY INTO THE DEBT TRAP .............................. 188 ZONING REGULATIONS NEED TO KEEP PACE ............................................................. 199 COLLEGE FOOTBALL COACHING CAROUSEL ............................................................... 204 INTERNATIONAL BUSINESS TRAVELERS BEWARE ........................................................ 212 GOOGLE DEFENDS ITS TRADEMARK FROM GENERICIDE ............................................ 228 THE MAIL-ORDER BRIDE PHENOMENON .................................................................... 237 Page 4 of 251 Ill. Bus. L.J. | Vol. 6 OVERTIME PAY AND WHITE-COLLAR EXEMPTIONS: SEEKING CLARIFICATION IN LIGHT OF RECENT REVISIONS ....................................................................................... 246 Page 5 of 251 Ill. Bus. L.J. | Vol. 6 BLOCKBUSTER’S $1 BILLION BID ON CIRCUIT CITY I. Introduction On April 14, 2008 Blockbuster Inc. announced publicly its offer to purchase electronic retailer Circuit City Inc. Blockbuster has been in talks with Circuit City for months regarding an acquisition. [1] On February 17, 2008 Blockbuster sent a letter to Circuit City Chairman Philip Schoonover offering over $1 billion for the transaction. [2] This is equivalent to $6 to $8 a share in cash for the company. [3]Blockbuster also stated that they were willing to pursue alternative deal structures to enable Circuit City shareholders to receive stock. [4] Circuit City is hesitant about the deal and has yet to reveal to Blockbuster its long-term corporate plans and performance data. [5] This paper will evaluate the benefits and negatives of the acquisition as well as discuss whether this merger should occur. II. Why Circuit City Should Consider the Merger The Blockbuster-Circuit City merger can result in benefits for both companies. Both Blockbuster and Circuit City have been suffering financially. Since January 6, 2008 Blockbuster had an outstanding debt of $758 million. [6] This debt was a result of Blockbuster's losing competition with various growing video rental alternatives on the rental market, such as mail-order DVDs from Netflix Inc., video-on-demand from cable services, and the sale of DVD's. [7] Circuit City also has been fighting a losing battle against its competitors, Best Buy and Wal-Mart. [8] Circuit City's shares had fallen from $30 in mid-2006 to $3.44 in March of this year. [9] After laying off 3,400 retail workers and receiving a $7.3 million tax Page 6 of 251 Ill. Bus. L.J. | Vol. 6 benefit, Circuit City finally achieved a profit of $4.85 million for its fiscal fourth quarter. [10] However, unlike Circuit City, it appears that Blockbuster is rising back to success. Nine months ago, Jim Keyes was brought in as Blockbuster's new CEO in order to revive the company. [11] Mr. Keyes focused on slashing costs, changing Blockbuster's online strategy, and improving the availability of merchandise. [12] His approach has worked as the projected first quarter net income for Blockbuster is $30 million, a drastic increase from last year's net loss of $49 million. [13] Keyes believes that Blockbuster's merger with Circuit City will result in even more success for the business. [14] First, the merger may result in cost savings by closing overlapping stores, cutting duplication at each company's head office, delivering products more effectively, and teaming up on advertising. [15] Store closings may prove to be a large cost savings since 95% of Circuit City stores are located within 5 miles of Blockbuster stores. [16] Furthermore, Keyes plans to redesign Blockbuster and Circuit City into a "user friendly one stop shop with solutions for the consumers." [17] For example, Circuit City stores would have movie and game rentals available while Blockbuster would have hardware, such as portable media players for sale. [18] Instead of advertising low prices, a combined chain could attract consumers with a wide range of products and services. [19] III. Riskiness of the Merger On the other hand, the Blockbuster-Circuit merger may be plagued with problems. One such problem is the cost of purchasing Circuit City. Buying Circuit City would add significantly to Blockbuster's already outstanding $789 million Page 7 of 251 Ill. Bus. L.J. | Vol. 6 debt load. [20] Circuit City is questioning whether or not Blockbuster would be able to pay the money necessary for the merger to occur. [21] Blockbuster stated that it could sell additional stock, borrow, and possibly get an investment from its largest shareholder, Carl Icahn, who has applauded Blockbuster's merger. [22] Another issue is that Blockbuster would be purchasing a larger company. Blockbuster's market capitalization of $630 million is about $80 million below Circuit City's $656.6 million. [23] Furthermore, the potential deal threatens to distract both companies from solving their own issues with their financial state in the market. [24] The Blockbuster and Circuit City merger has been compared to the K-Mart and Sears merger. [25] Both K-Mart and Sears, like Blockbuster and Circuit City, had been struggling to combat rivals, such as Wal-Mart and Target. [26] However, after the Sears and K-Mart deal, business for the merged entity has continued to spiral downward. [27] It is questionable whether the merger between Blockbuster and Circuit City, like the Sears and K-Mart merger, will just hasten the demise of the two companies. IV. Conclusion Although Blockbuster seems to have many good ideas to reinvigorate both businesses through offering a wide range of products and services, creating a "one stop shop," however, the reality of a successful merger is questionable. Both companies have suffered financially. Blockbuster is already $789 million in debt. Furthermore, Blockbuster would be purchasing the bigger company since Circuit City has about $80 million more market capitalization. As a result, Blockbuster could be in over its head with the costs of the merger. Already, Blockbuster is having trouble coming up with the money to purchase Circuit City. Blockbuster Page 8 of 251 Ill. Bus. L.J. | Vol. 6 claims that they may have to sell stock or borrow money in order for the merger to go through. Even though a cost savings may result from the store closings and advertising costs, this may not be