Companies that investors have left for dead have been busy trying to find new lives in deals. Take AOL and Yahoo or Delta and Northwest, for example.

The latest and strangest is Blockbuster's unsolicited offer to acquire Circuit City Stores for more than $1 billion in cash.

Blockbuster said today that it had approached Circuit City in February, but that it was now making its offer public because Circuit City has not allowed Blockbuster to conduct due diligence to make a formal offer.

In a February 17 letter to Philip Schoonover, the chief executive of Circuit City, Jim Keyes, the new C.E.O. of Blockbuster, said his company was prepared to offer $6 to $8 per share. That would be a premium of 67 percent to Circuit City's February 15 price and more than double Circuit City's closing price of $3.79 on Friday.

Blockbuster said in a statement that a merger "would result in an $18 billion global retail enterprise uniquely positioned to capitalize on the growing convergence of media content and electronic devices."

Keyes, a former 7-Eleven executive hired by Blockbuster last year, said the proposal "creates a game-changing retail concept." Carl Icahn, the activist investor who owns more than 10 percent of Blockbuster, supports the proposal for Circuit City, Blockbuster said.

Circuit City acknowledged that it had received Blockbuster's proposal and said that it would "continue to carefully consider and evaluate" it.

The Circuit City statement also questioned how Blockbuster, a smaller company, could finance a deal. "In particular, 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."

"In addition, Circuit City and its advisers have a number of other fundamental questions regarding the structure, sources, and uses of funds and consents required with respect to the proposed transaction."

Shares of Circuit City are up 33 percent in mid-morning trading, while shares of Blockbuster are down more than 10 percent.

The merger proposal is odd for several reasons. For one, both companies have been struggling.  

Blockbuster is engaged in a grinding battle with NetFlix, and its future is endangered by the kinds of digital downloads Apple and others are offering. While its most-recent quarter was much stronger than expected, prompting the company to forecast a profit for the year, Blockbuster did lose $124 million last year. And it is carrying $758 million of debt.

Circuit City has been slashing costs to return profitability, although it, too, faces grueling competition from Best Buy and Wal-Mart Stores. It is also facing a challenge from a major shareholder.

It's not clear how combining two different brick-and-mortar chains that are struggling with intense competition will spark some kind of transformation.

"Synergies between a video store and an electronics store aren't that obvious," Nick Bubb, a retail analyst at Pali International in London, told Bloomberg News.

Douglas McIntyre on the 24/7 Wall St. blog is extremely skeptical:

"There is no evidence that the combination of the companies saves a dime in expenses. How it enhances revenue is the stuff of fantasy. Blockbuster is suggesting that the combined firm take on debt to help finance the transaction. In the present environment, where debt is anathema, the proposal is especially insane."

These are the kinds of deals that are made in a recession. Depressed stock prices bring out strategic players either sniffing for opportunity—Microsoft's pursuit of Yahoo, for example—or trying to paper over the cracks in their business by becoming bigger. While on the surface a bold, creative maneuver, Blockbuster's approach smacks of desperation.