Blockbuster ready to go hostile on Hollywood
Rental giant plans $11.50 a share bid
DVD rental giant Blockbuster is ready to make a hostile takeover bid for rival Hollywood Entertainment as it moves to create a chain of more than 7,000 US stores with a market share of more than 60 per cent.
In the declining and increasingly competitive rental market, Blockbuster has said it plans a cash offer of $11.50 a share for Hollywood Video in mid-January, and will go higher if financial information requested from Hollywood justifies it.
It has outbid a consortium which includes Hollywood chairman Mark Wattles, which has offered $10.25 a share. The total value of the Blockbuster deal, including Hollywood’s debts of $300m, would be around $1 billion.
Blockbuster Chairman and CEO John Antioco said: “Blockbuster believes that this proposed acquisition is pro-competitive. In recent years, the home entertainment landscape has broadened considerably. Blockbuster today faces strong competitive challenges from the aggressive sale of DVDs by mass merchants and online retailers, as well as increasing penetration by premium cable and satellite services.
“Additionally, we believe the strength of competition from these and other emerging sources, such as video-on-demand and computer downloading, is likely to increase significantly in the future.”
Antico added: “We believe that the proposal Blockbuster is prepared to make is clearly in the best interests of Hollywood and Blockbuster shareholders as well as consumers. Additionally, as we have said before, we believe the proposed transaction will better position Blockbuster to compete in the rapidly changing home entertainment marketplace.”
Blockbuster said the combination with Hollywood will allow it to accelerate measures taken to deal with increasing competition, which include expanding its in-store offerings to include movie and game trading, store-in-store game boutiques, and an increased selection of new and used movies and games.
The company has also begun giving consumers new ways to rent through in-store movie, in-store game and online DVD rental subscription programs, and will eliminate late fees for all US stores on January 1.
