Blockbuster threatens hostile bid

DALLAS – Blockbuster Inc. said Tuesday it will launch a hostile bid for Hollywood Entertainment Corp. next month if the rival’s directors won’t negotiate a deal.

Blockbuster, the nation’s largest movie-rental chain, said it would offer stockholders of its top rival $11.50 per share in cash, or about $700 million, plus the assumption of $300 million of Hollywood debt, in mid-January. That’s the same offer that Blockbuster made to Hollywood management in November.

Blockbuster said it would consider sweetening the offer based on the contents of Hollywood’s internal financial information, but Hollywood has refused to provide the information. Edward B. Stead, Blockbuster’s general counsel, said Hollywood conditioned negotiations on Blockbuster agreeing not to launch a tender offer for three years, which Blockbuster rejected.

Hollywood shares have gained more than 30 percent since Blockbuster revealed its interest and have hovered around the $13 mark – above Blockbuster’s offer – for five weeks.

The cash tender offer is the latest salvo in a competition for Hollywood that pits Blockbuster against Hollywood chairman Mark Wattles and a Los Angeles investment firm, who have offered $10.25 per share, or about $624 million.

The nation’s No. 3 rental chain, Movie Gallery Inc., also says it has made an offer but won’t disclose its price. Analysts believe Movie Gallery is waiting in the wings in case antitrust regulators kill a Blockbuster deal.

John Antioco, chairman and chief executive of Dallas-based Blockbuster, said his offer “is clearly in the best interests of Hollywood and Blockbuster shareholders as well as consumers.”

Blockbuster believes that by acquiring Wilsonville, Ore.-based Hollywood, it can better compete in the changing home entertainment market. Once dependent on video stores, consumers now have many options for buying or renting movies, including low-priced DVDs at discount stores, online-ordering services and cable movies on demand.