When Blockbuster made public their intention to acquire the struggling electronic chain Circuit City on April 14th for about $1 billion, everyone was doing a collective "huh?" at the proposed merger. Blockbuster's stock took a plunge to $2.81/share from the previous close of $3.13/share. The stock is currently at up to $3.02 as of this writing.

Blockbuster's brick-and-mortar business has taking a beating from Netflix and their plan to turn the company around involves being a bigger player in media distribution: selling/renting media and electronics as well as subscription services. In order for them to do that, they need expertise in consumer electronics. Hence, Circuit City, the electronic chain who has seen its best days.

It seems like Blockbuster's management had convinced themselves that they need to go this route or else they will face another formidable competitor like Netflix who will displace them in emerging markets like Video on Demand (VOD).

Nearly everyone was skeptical that this plan will work out. Two companies in two different segments trying to turn themselves around, merging; it's a likely recipe for disaster.

However, it looks like there are fans of this proposed merger. According to paidContent.org, Wattles Capital Management, who owns 6.5 percent of Circuit City's shares, favors the deal and is currently involved in a proxy battle to get five of its own directors on the board.

It's unlikely that WCM likes Blockbuster or their turnaround plan, they just want to see a return on their investment and don't want to see Circuit City's stock drop to nothing.