The awkward pairing of Circuit City and Blockbuster is past the spitball phase and into the handholding phase. The struggling electronics giant says it will allow Blockbuster and its investor Carl Icahn to conduct due diligence into the company, and it says it has hired Goldman Sachs to help it explore strategic alternatives. But it notes that no agreement has been made yet, and you can assume that it would like to know what else is out there before going with Blockbuster (NYSE: BBI). In its initial announcement, Blockbuster said that its purchase offer could include shares and cash, in the (off) chance that CC shareholders wanted to keep a stake in the new company. Most likely, they just want cash.

One of Circuit City’s concerns had been financing. How would Blockbuster pay for the buy which comes to over $1 billion? The answer it got from Blockbuster is that Carl Icahn could conceivably buy Circuit City himself (and merge it with Blockbuster) if Blockbuster couldn’t obtain financing directly. Release.

Not much new from Blockbuster’s end. It’s “pleased”. Release.

Blockbuster first announced in mid-April that it was interested in acquiring Circuit City, for a premium of at least 54 percent over its then closing price. Analysts investors pretty much hated it off the bat, not really getting the vision, or understanding how the two made sense together.

Separately, Circuit City said that it had averted a proxy fight with investor Wattles Capital Management, giving the group three seats on its board. WCM had attacked the company for its intransigence. Release.

• Blockbuster Seeks To Acquire Circuit City; At Least 54 Percent Premium