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Blockbuster Tries Again

DALLAS-Blockbuster Inc. has made a hostile takeover bid for Hollywood Entertainment, which previously agreed to be bought by Movie Gallery.

By Dees Stribling | Updated on February 03, 2005

DALLAS-The Blockbuster-Hollywood story took another turn late Wednesday when Blockbuster Inc., the nation’s largest chain of video stores, made a hostile bid for Hollywood Entertainment Corp., owner of the second-largest video chain. In its filing yesterday with the SEC, Blockbuster offered to buy all outstanding shares of Hollywood for $11.50 in cash and $3 in Blockbuster stock each, or a total of nearly $1 billion, not counting the roughly $350 million in Hollywood debt that Blockbuster said it would assume.

The offer takes effect tomorrow and expires on March 11. By making a direct offer to the shareholders of Hollywood, Blockbuster seems to be trying an end-run around Hollywood’s board of directors, which has spurned its offers in the past. In fact, in January, the board agreed to a different offer to buy Hollywood, from Alabama-based Movie Gallery for $13.25 per share in cash.

Blockbuster’s persistence in seeking Hollywood is no surprise, since it publicly stated last month that the effort wasn’t over, despite the agreement between Hollywood and Movie Gallery. The zeal with which Blockbuster is pursuing the deal, observers note, is probably because the company sees it as a way to shore itself up against increasing competition, such as the popular on-line DVD rental service Netflix.

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