Offer sweetened for Hollywood

DALLAS — Blockbuster Inc. has raised the ante for rival movie-rental chain Hollywood Entertainment Corp., launching a hostile takeover bid that it hopes will derail Hollywood’s pending sale to Movie Gallery Inc.

Blockbuster, the nation’s largest movie-rental chain, said Wednesday it offered $14.50 per share in cash and stock for No. 2 Hollywood, or about $985 million based on Hollywood’s outstanding shares and options.

Movie Gallery, the nation’s third-largest movie-rental company, had agreed last month to pay $13.25 cash per share, or about $900 million. Both suitors promise to assume $350 million in Hollywood debt.

Hollywood has rejected Blockbuster’s advances over the past several months, including an offer of $11.50 per share in cash. Blockbuster’s new hostile tender offer would begin Friday and run through March 11 and consist of $11.50 in cash and $3 in its own stock for each Hollywood share.

Hollywood shares gained 8 cents to close at $14.25 on the Nasdaq Stock Market and rose another 15 cents in after-hours trading — to within 10 cents of Blockbuster’s offer.

Blockbuster shares rose 20 cents, or 2.2 percent, to $9.40 on the New York Stock Exchange, and Movie Gallery shares picked up 22 cents to close at $21.25 on the Nasdaq.

Analysts said Movie Gallery could argue that its offer is still superior because Blockbuster might have more difficulty winning approval for a deal from antitrust regulators. Blockbuster said Wednesday it had received a request for more information on its proposal from the Federal Trade Commission.

All three chains face growing competition from online movie-order services, including Netflix Inc. and Wal-Mart Stores Inc.