UPDATE 4-Circuit City in deal talks; shares surge

(Adds court approval)

By Karen Jacobs and Cyntia Barrera Diaz

ATLANTA/MEXICO CITY, Jan 9 (Reuters) - Circuit City Stores Inc (CCTYQ.PK) received court approval on Friday to put itself up for sale and said it was in talks with two undisclosed parties that could either buy the bankrupt electronics chain or provide additional financing.

A ruling by U.S. Bankruptcy Court Judge Kevin Huennekens will let the company proceed with an auction of the company and its assets beginning on Tuesday, with liquidation possible if no sale occurs. Another hearing is set for Jan. 16.

A lawyer for Circuit City said the company hopes to have a going concern buyer in place by the end of Wednesday and be able to present a financing deal by the next court date.

Chief Financial Officer Bruce Besanko would not identify the negotiating partners on Friday, but said they were strategic and financial buyers. The company said the parties had substantially completed due diligence and now were in talks to finalize a deal.

Mexican retail and media entrepreneur Ricardo Salinas Pliego, who has built up a stake of at least 28 percent in the company, is conducting a thorough analysis of Circuit City, his spokesman said.

The aide would not say whether Salinas was one of the potential buyers, but said he was granted full access to Circuit City's books after agreeing not to buy more shares without first notifying the company and U.S. authorities.

"We have sent experts there and have kept tight, intense talks with the company," spokesman Nino de Rivera said.