"Blockbuster’s proposal appears to contemplate a rights offering of unprecedented size relative to the issuing company’s market capitalization and at a price that is at a significant premium to Blockbuster’s current market price,”Circuit City said in a statement today following Blockbuster's disclosure. “Circuit City’s advisors have noted that most rights offerings, of which there have been very few in the United States, occur at discounts to market.”

The video rental company said earlier today that it made the offer in February in a letter to Circuit City CEO Philip Schoonover.

Blockbuster's unsolicited bid for Circuit City could signal the company is moving towards a new direction. Concerned by new emerging services such as Video on Demand and digital downloads, the retailer could be shifting focus to selling TV-related hardware and software rather than relying on video rentals.

The company recently announced that it's expanding the number of stores that will both sell and rent Blu-ray high-def discs, a new category that will compete with VOD and downloads.

Blockbuster CEO Jim Keyes said the Blockbuster-Circuit City joining would create "the most convenient source for media entertainment."

Circuit City has been rumored as a takeover target for months due to declining profits.