- The Washington Times - Thursday, November 11, 2004

DALLAS (AP) — 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 in movie rentals, said yesterday that it had communicated its interest to No. 2 Hollywood Entertainment but that there have been no substantive talks on terms of a deal.

Hollywood Entertainment is already in a deal to let its chairman and chief executive officer and a buyout firm take the company private. The agreement, however, allowed Hollywood to solicit other bids, and the CEO said he welcomed the offer.

The deal would give Blockbuster, which already has 9,000 outlets worldwide, more than 1,920 Hollywood Video stores and 600 Game Crazy specialty stores. But it could also raise antitrust questions.

In 1999, a plan by the two companies to rename Hollywood stores under the Blockbuster banner was stopped by the Federal Trade Commission, but analysts say a merger of the two largest movie-rental firms stands a better chance now.

Stacey Widlitz, an analyst for Fulcrum Global Partners, said regulators would probably block Blockbuster’s plans if they considered the movie-rental business as a distinct industry, but not if they lumped rentals with sales of DVDs and games. The combined company would control about half the U.S. rental business but only about 20 percent of rentals plus retail sales.

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 a Los Angeles buyout firm.

Blockbuster shares rose 82 cents to close at $8.20 yesterday on the New York Stock Exchange; Hollywood Entertainment shares rose $1.13 to $10.93 on the Nasdaq Stock Market.

Retailers such as Wal-Mart Stores Inc. sell DVDs so cheaply that they tempt movie renters. In addition, Blockbuster now faces competition from subscription online rental operators such as Netflix Inc.

The new nature of the competition was reflected in recent price cuts by leading providers of Internet movie rentals. Netflix and Blockbuster knocked more than 10 percent off their monthly online subscription rates, and Wal-Mart jumped into the fray by undercutting both. The price war was triggered by Netflix’s fear that Amazon.com Inc. would muscle into the business.

“The four companies are going to beat each other to death,” said the analyst Miss Widlitz. She was lukewarm on Blockbuster’s bid: “It’s one company in a declining business buying another.”

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide