Blockbuster Considering Hostile Takeover of Hollywood

Blockbuster, unhappy that Hollywood Video is still considering their options, is putting the heat on and is threatening a hostile takeover.

Reuters.com on the deal:

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.

Elites TV has more on the deal:

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.

Comments

[Dustin J Barral]

Blockbuster is not going to buy out hollywood video. Watch the non-corporate stores of hollywood would survive the buy out and not only stay alive but kill blockbuster. Plus the owner of the non-corporate stores will buy the public ones back and blockbuster will be screwed. Plus blockbuster is just in a hole thats why they are coming out with their no late fees thing. But what people dont realize is that they will be charged the amount of the movie if they dont return it. Also the only reason that blockbuster wants to buy hollywood video out is cause they are losing business, they are scared.

[BBCSR]

And you think that that is bad??
Do you think people should just get to pay a couple bucks and own the movie? You have 37 day to get the movie back for god sake (1.25 processing fee after the first 7 days)!!! It that so unreasonable??
You sound like the plan got worse.

[heather]

Blockbuster has just come up with a way to try and make its customer's happy. What is wrong with getting rid of the number one thing people hated about blockbuster? People will always find something wrong with every move that a "big" company makes. You do not see all of these people complaining when you get charged a late fee from a mom and pop rental store that runs out of a corner gas station. Why is that???? I think people just have a problem with "Big Business"

[huh]

Blcokbuster is "scared"? of what? Have you actually looked at the numbers and trends?

[Scott]

Let's look at this whole "no late fee thing" again. The question is asked, is it bad to charge a customer the cost of a movie when it doesn't come back in 37 days? Well, yea. If you get charged 14.99 (the average cost of a Previously viewed new release at Blockbuster), you'd save about $5.00 ONLY, if you had rented the item at Hollywood Video, kept the movie the same amount of time, and returned it paying late fees. Yes, it's a little bit more, but what you're all not hearing yet from the video giant, is that Blockbuster is about to raise their prices! Not by much, but it will close the gap from Hollywoods fees and Blocks policy. The only thing Block has going for it is that you get to keep the movie if you go past 37 days. Let's face it, how many customers who have items out that long really want to keep that movie in the first place!?

Guys, the real issue here is not the policy of Block or Hollywood. It's that we live in a society today full of lazy, irresponsible people who don't want to take responsibility or thier own actions! A customer signs an agreement saying they'll return the item on time (ALL Video rental companies have their customers sign this at membership signup), the chains clearly state when the items' due dates are with signage all over the store and in Hollywoods' case, they even put the date on the recpeit with the date it is due. These companies spend money staffing a call center to call these customers to remind them that an item is due, they send out letters and make every resonable costly effort you can think of to get hold of these customers! What is the problem guys? If you rent a movie, just return the darn thing on time!!! How hard is it?? If a customer has a memory problem, don't you think the responsibility should fall on the person who rents the item, not the company that goes out of its way to get that item back!

Remember, every day that DVD or video is out of the store, it's one more day that it can't be rented to another customer, thereby decreasing the revenue that item can pull in. Since most titles only rent in the first three weeks, and the value of the items decreases as time goes on, should the answer then be that the video chains have to loose money because some lazy, uninformed customers cant get their product back on time!?

Come on guys, the probelm is that too many customers can't see the big picture. It's all about them all the time! I say, fine, video chains don't charge late fees. But when the cost of movie rentals goes up to $15 a pop, dont blame the chains. Afterall, they are a business looking to make a profit. Funny how these delinquent guests tend to forget that little fact. When the prices go up, blame those lazy schmucks who can't get thier acts together!!

It may sound like I'm anti-cutomer. I'm not. I happen to work in this industry and can tell you that most customers are reasonable when it comes to the whole "late fee" thing. The issue, quite frankly, are those few customers who have the responsibility level of a child. It's a shame that we all have to suffer the late fee drama, but really, ask yourselves, do you think that Hollywood, for example, would keep it's late fee policy or that Block would simply sell the item to a guest if these two giants didn't have to compensate for the delinquent guests in the first place? Don't you think we in the business KNOW how much late fees are hated. The simple reality is that if guests could keep their items out as long as they wanted with no compensation for the company they rented it from, these video chains would be out of business. Someday, technology will make these chains obsolete anyway, but in the meantime, for those of you griping about late fees .. just get your DARN MOVIES BACK ON TIME .. AND STOP BLAMING EVERYONE ELSE FOR YOUR MISTAKES! GROW UP AND TAKE SOME RESPSONSIBILITY! If these chains make a mistake charging you, you expect to be compensated! Why shouldn't the chains be compensated when YOU make a mistake! I suggest if you can't get the items back on time, stop renting!

[REN]

Wow, long post. I just want to comment on your view of society, heh. I don't think it has anything to do with BB removing late fees. Removing the late fees is a service, an incentive over other rental companies. If BB can afford to provide this service to people why shouldn't they? Does BB have an obligation to train people to be reponsible by enforcing late fees? They are trying to compete with the new trend of online services which use "no late fees" as one of their major advantages. I know that I don't like the deadline of having to return a movie the next day. Sometimes I am lazy, sometimes it is inconvenient, sometimes I want to keep it for a few days to watch the extras. Why shouldn't BB strive to be as flexible as it can with its store customers?

This would have been a big incentive for me before I started renting online. I plan to stick with online services. NF can provide me rentals for $1 a piece. If I rent 3 movies and keep them out for a month it only costs me $18.

[REN]

As for your comparison of the way the two companies handle late fees, I consider being able to keep the movie a big deal. You can look at it like a payment plan. After that period you own the movie and I assume it isn't held against you on your record. You can always return it and pay a small restocking fee. As for Hollywood, the late fees aren't that much, but for how long do they accumulate and if you lose the movie how much do you owe?

I remember back when late fees where close to the price of the rental for each day it was late. I bet some local stores still do it this way.

[Robby Knighton]

I work at Family Video, which is the largest privately owned video rental company in the United States (and world as far as i know). Anyway we are somewhat of what you may call the "local type". we charge the same price for late fees as the movie itself was to rent. for 12.95 you can get half off all your movies and games for an entire month. Making new releases 1.3 per night (for brand new items) or 1.3 for 5 nights for older releases such as Wimbledon or Walking Tall. Every other movie in the store is 50 cents. who can beat THOSE prices? We are putting the local Blockbuster and Video Varieties OUT. Not that that any of that was important but i thought i would say all that lol.

Anyway i totally agree with the lazy customer thing and also we dont make people sign anything to rent. Photo ID and a phone number is ALL we require. Our store runs on the honor system i suppose lol.