Dallas — Blockbuster Inc., facing new attacks from big retailers and online operators, has offered $700 million for rival Hollywood Entertainment Corp. in a bid to combine the two biggest players in the movie-rental industry.
Blockbuster, the biggest name in movie rentals, said Thursday that it had communicated its interest to No. 2 Hollywood Entertainment, but that there had been no substantive talks on terms of a deal.
Blockbuster Inc. has offered $700 million for rival Hollywood Entertainment Corp. in a deal that would extend Blockbuster's position as the world's largest movie-rental company.
Hollywood Entertainment already is in a deal to let its chairman and chief executive and a buyout firm take the company private. But the agreement allowed Hollywood to solicit other bids, and the CEO said he welcomed Blockbuster's offer.
Dallas-based Blockbuster said it offered $11.50 per share, a 17 percent premium over Wilsonville, Ore.-based Hollywood Entertainment's closing price Wednesday of $9.80 per share, and would assume about $350 million in Hollywood Entertainment debt.
The deal would trump the pending bid of $10.25 per share for Hollywood Entertainment by Leonard Green & Partners LP, a Los Angeles buyout firm.
The deal would give Blockbuster -- which already has 9,000 outlets worldwide, including two in Lawrence -- more than 1,920 Hollywood Video stores and 600 Game Crazy specialty stores.
Blockbuster is looking to succeed in the face of retailers such as Wal-Mart Stores Inc., which sell DVDs so cheaply that they tempt movie renters. In addition, Blockbuster now faces competition from subscription online rental operators such as Netflix Inc.
But the deal also could raise antitrust questions, although analysts say a merger of the two largest movie-rental firms would stand a better chance than in 1999, when a plan by the two companies to rename Hollywood stores under the Blockbuster banner was stopped by the Federal Trade Commission.
Stacey Widlitz, an analyst for Fulcrum Global Partners, said regulators likely would block Blockbuster's latest plans if they considered the movie-rental business as a distinct industry, but not if they lumped rentals with retail sales of DVDs and games.
The combined company would control about half the U.S. rental business, Widlitz said, but only about 20 percent of rentals plus retail sales.
No comments
Commenting is turned off for this story.