Blockbuster, unhappy that Hollywood Video is still considering their options, is putting the heat on and is threatening a hostile takeover.
Blockbuster Inc., the No. 1 U.S. video rental chain, on Tuesday threatened to launch a $1 billion hostile bid for Hollywood Entertainment Corp. if its smaller rival decides to stick with a previous offer from a buyout firm.
Dallas-based Blockbuster said it would launch a tender offer for Hollywood at $11.50 a share by mid-January if Hollywood rejects its pleas to consider friendly talks to counter a previous $10.25-a-share agreed bid by Leonard Green & Partners LP.
The Wall Street Journal noted that there may be a problem with Hollywood:
McAlpine said Movie Gallery may actually be the better partner for Hollywood. Blockbuster and Hollywood stores are often in close proximity, while Movie Gallery is usually in different markets, he said. McAlpine doesn't maintain an investment banking relationship with any of the companies and McAlpine himself doesn't own shares.
Investors may also wait to see Hollywood is hiding, he said. Leonard Green originally offered $14 a share for the company, then lowered his bid to $10.25 a share after seeing the books.
"The real concern among anybody interested in Hollywood is, what did Leonard Green find?" said McAlpine.
The battle for video and DVD rentals heated up this week as Blockbuster indicated it would seek to buy out rival Hollywood video and would do so by hostile takeover if necessary. Thus far, Hollywood has refused to negotiate a sale with Blockbuster and the number one chain is apparently losing patience.
The offer includes $700 million in cash and the assumption of $300 million in Hollywood Video's debt. After the announcement was made, shares of Blockbuster Video fell to $9.33.
I think the billion dollars would be better spent buying Netflix (gasp!) before Amazon (or someone else) gets them.
Thanks to Joe & The Blockbuster Guy for contributing to this story.