Blockbuster can start due diligence on Circuit City

Circuit City said Friday that it is exploring strategic alternatives and will allow Blockbuster and investor Carl Icahn to "conduct additional due diligence."

Last month, Blockbuster announced a rather perplexing plan to acquire Circuit City in an attempt to take two struggling retailers and make one strong one.

In a statement Circuit City said it has retained Goldman Sachs to explore strategic alternatives. Philip J. Schoonover, CEO of Circuit City, said:

"While the Circuit City board has confidence in the company's ability to successfully implement its turnaround plan and generate shareholder value, we believe that we can best serve the interests of our shareholders by exploring all possible alternatives to enhance shareholder value. Let me be clear that our decision to allow Blockbuster and Carl Icahn to conduct due diligence should not be taken as an indication that the board has completed its review of the Blockbuster proposal, that the board has taken a position on the company's value or that it has settled upon a particular strategic course of action."

I'll be really curious to see how this due diligence plays out. This proposed merger makes no sense to me.