Circuit City Stores Inc., the nation’s No. 2 consumer electronics retailer, will sell its private-label credit-card business to Bank One Corp. for $1.8 billion in cash.
Circuit City said Tuesday that it is shedding the credit-card operation so it can focus on renovating and relocating aging stores, as well as opening new outlets. In November, the retailer sold a bank-card portfolio to FleetBoston Financial for $1.3 billion.
The upcoming sale “further simplifies the investment picture for Circuit City shareholders and allows us to focus our attention on the needed improvements in our retail business,” said W. Alan McCollough, the company’s chief executive officer, in a statement.
As part of the deal, Chicago-based Bank One will compensate Circuit City for new credit-card accounts and provide special financing terms for the retailer’s customers.
When the transaction closes between April and June, Bank One will assume control of the credit card operation, which includes 700 employees in Atlanta and Richmond.
FleetBoston, however, has decided against retaining 300 employees at both centers, Circuit City spokesman Bill Cimino said. Those workers were informed several months ago that they will be let go after the transition is complete. They will be offered severance packages and job assistance, he said.
Circuit City anticipates that its relationship with Bank One will generate annual pretax earnings between $27 million and $30 million. That’s similar to the finance income it would generate if it retained the private-label finance operation.
Circuit City expects to incur an estimated after-tax loss of $10 million, or about 5 cents per share, mostly because of transaction-related expenses. Most of the charges will be taken in the company’s fourth and first quarters.
Bank One anticipates that the transaction will boost earnings slightly in 2004.