Hollywood gets second buyout offer

PORTLAND — Video rental company Movie Gallery Inc. became the third company to vie for Hollywood Entertainment Corp., claiming Friday that its offer was more likely to win antitrust approval than the $700 million bid made by industry leader Blockbuster Inc. last week.

Movie Gallery declined to say how much it was offering, but analysts speculated it would have to be at least $12.50 per Hollywood share — or roughly $760 million — to be competitive. Blockbuster is offering $11.50 per share, while Leonard Green & Partners LP, a Los Angeles buyout firm, is offering $10.25 per share.

“Blockbuster’s proposed acquisition would create a dominant player with significant competitive overlap in the vast majority of markets served by Blockbuster and Hollywood Entertainment,” Movie Gallery chairman and chief executive Joe Malugen said in a statement.

“We do not believe regulators will adopt the expanded view of the market that Blockbuster needs to complete a transaction.”

Alex Bond, a senior vice president for Hollywood, had no immediate comment.

The offer sent Hollywood shares surging. They closed up 85 cents, or 7.3 percent, at $12.53 on the Nasdaq Stock Market, while the Movie Gallery shares slipped 5 cents, or 0.3 percent, to $17.48. Blockbuster shares finished the day down 37 cents, or 4.4 percent, at $8.05 on the New York Stock Exchange.

“While we don’t know the price Movie Gallery is offering, I think the assumption is even if it’s the same as Blockbuster’s, there might be a little bit of a bidding war from $11.50 to $12.50 given its trading price today,” said Arvind Bhatia, an analyst with Southwest Securities in Dallas.

Blockbuster is the nation’s largest video rental chain, followed by Hollywood Entertainment, known by its Hollywood Video stores, and then the Movie Gallery.

Movie Gallery, based in Dothan, Ala., currently has about 2,200 rental stores in mostly rural areas of the United States and Canada.