Circuit City to liquidate, shutter stores

By Karen Jacobs and Emily Chasan

ATLANTA/RICHMOND, Virginia (Reuters) - Bankrupt electronics retailer Circuit City Stores said on Friday it will liquidate its assets and shutter hundreds of U.S. stores after failing to reach a deal to sell the company.

Circuit City is one of the largest retail bankruptcies in the current U.S. recession. Its demise paves the way for larger rival Best Buy Inc to boost sales and gain clout with suppliers as the leading electronics retailer.

U.S. Bankruptcy Judge Kevin Huennekens approved the plan to liquidate Circuit City, and the No. 2 retail player in U.S. electronics said it would begin closing stores on Saturday.

"Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders to structure a going-concern transaction ... and so this is the only possible path for our company," Vice Chairman James Marcum said.

Private equity firm Golden Gate Capital and Mexican retail and media tycoon Ricardo Salinas Pliego, who owns more than 28 percent of the company, had indicated an interest in bidding for the company, Gregg Galardi, a lawyer representing Circuit City, told the bankruptcy court in Richmond.

Shares of the chain fell 77 percent to 3.5 cents. Shares of Best Buy, which analysts have said stood to gain longer-term if Circuit City went out of business, closed up 8.1 percent.

An evaluation of bids for Circuit City's Canadian unit is still under way, and it may seek to sell its website, Galardi said.