RICHMOND, Va. (AP) _ An activist shareholder on Wednesday urged Circuit City Stores Inc. to allow Blockbuster Inc. to examine its finances and start good-faith negotiations on the movie-rental chain's bid for the struggling electronics retailer.

Wattles Capital Management, which owns about 6.5 percent of Circuit City's stock, said in a letter to Circuit City that the company should provide access to Blockbuster and discuss its buyout proposal along with other possible bids.

Blockbuster announced a takeover bid last week of just over $1 billion for Circuit City with dreams of creating huge chain that would sell electronic gadgets and rent movies and games.

The Dallas-based company said it approached Circuit City in December, and sent a letter in February to its chief executive, Philip Schoonover, offering $6 to $8 per share.

Based on Circuit City's 168.4 million shares outstanding at the end of last year, the February offer of $6 to $8 per share valued Circuit City at $1.01 billion to $1.35 billion.

Circuit City, the nation's second-biggest consumer electronics chain, has said it doubts Blockbuster could finance the deal and has resisted opening its books.

"While we can understand the board's desire to become comfortable with how Blockbuster would specifically finance this transaction, there are certain reasons why this offer should be taken seriously," Mark J. Wattles, in a letter to Schoonover and the company's board of directors, said Blockbuster is not a competitor of Circuit City, so providing the information poses no competitive threat. And, he said, Carl Icahn, Blockbuster's largest shareholder, appears willing to help finance the offer.

Wattles also told the board not to take "any actions aimed at further rebuffing Blockbuster, imposing roadblocks to the consummation of a transaction, or adopting any plans that make a change of control more costly."

The founder of the Hollywood Entertainment video-rental chain said Blockbuster could raise a significant portion of the financing from Circuit City's balance sheet. Wattles also cited indications from Blockbuster that it was unlikely to pursue a hostile bid and, if the company withdrew its offer, "Circuit City shareholders will be immediately and substantially damaged."

In a statement Wednesday, Circuit City reiterated its concerns about Blockbuster's ability to finance the deal.

"Circuit City awaits a viable financing structure that is predictably executable by Blockbuster given its current constraints of size and capital structure before it would be appropriate to allow further due diligence," the company said.

Blockbuster spokeswoman Karen Raskopf said the company made its proposal public because Circuit City had failed to provide due diligence necessary to allow them to make a definitive proposal.

"We believe the shareholders of Circuit City should have the opportunity to participate in determining the destiny of the company," Raskopf said. "We believe the transaction would allow both companies to benefit from the revenue growth that could be generated by our complementary products and we think that the resulting synergies would substantially improve the consolidated financial performance."

Shares of Circuit City fell 11 cents to $4.62 in trading Wednesday, and Blockbuster's shares fell 1 cent to $2.88.

Richmond-based Circuit City swung to a profit of $4.85 million for its fiscal fourth quarter due to a $7.3 million tax benefit. It lost its status as No. 1 American consumer electronics chain in the 1990s to Best Buy Co., which built bigger stores in better locations and operated more efficiently.

Lately, Circuit City has been pinning its recovery on smaller concept stores, cost-cutting and its Firedog tech-service business. The company has laid off 3,400 retail workers and hired lower-paid replacements.

Blockbuster has struggled for several years to compete with cheap DVDs from retailers such as Wal-Mart Stores Inc., video on demand from cable and satellite TV operators, and the by-mail rental service of Netflix Inc.

Blockbuster Chief Executive James Keyes has said combining the companies would create a 9,300-store chain that could sell portable devices and entertainment for them, much like Apple Inc.'s stores. The larger Circuit City stores would have movie-rental stores inside, and Blockbuster locations would offer a limited selection of electronics.

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Copyright 2008 The Associated Press.