Hollywood Entertainment (NASDAQ:HLYW)
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Blockbuster to Launch Cash Tender Offer for Hollywood
Entertainment
Company Reiterates Willingness to Consider Higher Price if Hollywood Board
Cooperates and Allows Review of Financial and Other Information
DALLAS, Dec. 28 /PRNewswire-FirstCall/ -- Blockbuster Inc.
(NYSE:BBINYSE:BBI.B) today announced that it intends to commence a cash tender
offer by mid-January to purchase all of the outstanding shares of Hollywood
Entertainment Corporation (NASDAQ:HLYW) for $11.50 per share in cash, if
Blockbuster is unable to obtain substantial cooperation from Hollywood's Board
of Directors that is likely to lead to an agreement for an acquisition of
Hollywood by Blockbuster. Importantly, Blockbuster also reiterated its
willingness to consider a higher price if Hollywood's Board cooperates and if
the financial and other information sought from Hollywood support such an
increase. Blockbuster has not been given access to such Hollywood information.
Following the completion of any tender offer, Blockbuster intends to acquire
any shares not purchased in the tender at the same per share cash price paid in
the tender offer, pursuant to a merger by a subsidiary of Blockbuster with and
into Hollywood.
Blockbuster's proposal represents a substantial premium over the price provided
in the current merger agreement between Hollywood and the buying group
comprised of Leonard Green Partners and Hollywood's chairman, Mark Wattles,
which is valued at $10.25 per share. The total value of the Blockbuster
transaction, including Hollywood's debt, would be approximately $1 billion.
The proposed transaction would be immediately accretive to Blockbuster's
earnings per share and cash flow.
"We believe that the proposal Blockbuster is prepared to make is clearly in the
best interests of Hollywood and Blockbuster shareholders as well as consumers,"
said John Antioco, Blockbuster Chairman and CEO. "Additionally, as we have
said before, we believe the proposed transaction will better position
Blockbuster to compete in the rapidly changing home entertainment marketplace."
The tender offer will be subject to customary conditions, including the
expiration or termination of the applicable waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act ("HSR"), the termination of Hollywood's
existing merger agreement for the Leonard Green Partners transaction, certain
actions to ensure that the Oregon control share acquisition statute and
business combination statute are not applicable to Blockbuster following the
tender offer, and the receipt of funds under Blockbuster's financing
arrangements that are being put in place for the tender offer.
Blockbuster believes it should obtain the necessary regulatory approvals to
complete the transaction expeditiously and intends to quickly make its
necessary filings under HSR.
"Blockbuster believes that this proposed acquisition is pro-competitive," said
Antioco. "In recent years, the home entertainment landscape has broadened
considerably. Blockbuster today faces strong competitive challenges from the
aggressive sale of DVDs by mass merchants and online retailers, as well as
increasing penetration by premium cable and satellite services. Additionally,
we believe the strength of competition from these and other emerging sources,
such as video-on-demand and computer downloading, is likely to increase
significantly in the future."
Blockbuster believes the combination with Hollywood will allow it to provide a
better overall customer experience. Blockbuster has taken important steps to
deal with increasing competition by expanding its in-store offerings to include
movie and game trading, store-in-store game boutiques, and an increased retail
selection of both new and used movies and games. The Company has also begun
giving consumers new ways to rent through in-store movie, in- store game and
online DVD rental subscription programs, which offer no due dates, no late fees
and an unlimited number of movie and game rentals, up to three at a time,
depending on the program, for one low monthly fee. Additionally, Blockbuster
recently reduced its online rental program to $14.99 per month and, in a
groundbreaking move, eliminated late fees for all U.S. company-operated stores
as of Jan. 1, 2005. As a result of the elimination of late fees, which in
effect decreases its rental prices, Blockbuster previously announced its plans
to reduce 2005 capital expenditures through fewer store openings and remodels.
An acquisition of Hollywood would allow Blockbuster to immediately accelerate
its plans to bring its expanded array of offerings to more consumers through an
accretive acquisition of stores.
Blockbuster has retained Citigroup, Credit Suisse First Boston and JPMorgan to
act as financial advisors for the transaction and has received a financing
commitment from JPMorgan, Credit Suisse First Boston and Citigroup for the
funds necessary to complete the tender offer, as described.
THIS PRESS RELEASE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT AN OFFER TO
BUY OR THE SOLICITATION OF AN OFFER TO SELL ANY SHARES. A SOLICITATION OR
OFFER TO BUY HOLLYWOOD'S COMMON STOCK MAY BE MADE, IF AT ALL, PURSUANT TO A
TENDER OFFER STATEMENT, AN OFFER TO PURCHASE AND RELATED MATERIALS. HOLLYWOOD
SHAREHOLDERS SHOULD READ THE TENDER OFFER STATEMENT, THE OFFER TO PURCHASE AND
ANY RELATED MATERIALS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION, INCLUDING THE TERMS AND CONDITIONS OF ANY OFFER.
HOLLYWOOD SHAREHOLDERS WILL BE ABLE TO OBTAIN THE TENDER OFFER STATEMENT, THE
OFFER TO PURCHASE AND RELATED MATERIALS WITH RESPECT TO ANY TENDER OFFER, IF
APPLICABLE, FREE AT THE SEC'S WEBSITE AT WWW.SEC.GOV OR FROM BLOCKBUSTER INC.
AT WWW.BLOCKBUSTER.COM .
HOLLYWOOD SHAREHOLDERS ARE URGED TO READ ANY PROXY STATEMENT REGARDING THE
PROPOSED TRANSACTION IF AND WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. BLOCKBUSTER AND ITS DIRECTORS AND EXECUTIVE OFFICERS
MAY BE DEEMED TO BE PARTICIPANTS IN THE SOLICITATION OF PROXIES IN RESPECT OF
THE PROPOSED TRANSACTION BETWEEN HOLLYWOOD AND BLOCKBUSTER. HOLLYWOOD
SHAREHOLDERS WILL BE ABLE TO OBTAIN A COPY OF ANY PROXY STATEMENT, AS WELL AS
OTHER FILINGS CONTAINING INFORMATION ABOUT THE PARTIES (INCLUDING INFORMATION
REGARDING THE PARTICIPANTS IN THE PROXY SOLICITATION AND A DESCRIPTION OF THEIR
DIRECT AND INDIRECT INTERESTS, BY SECURITY HOLDINGS OR OTHERWISE), FREE AT THE
SEC'S WEBSITE AT WWW.SEC.GOV OR FROM BLOCKBUSTER AT WWW.BLOCKBUSTER.COM .
This news release contains forward-looking statements relating to Blockbuster's
interest in acquiring Hollywood Entertainment Corporation including its
intention to commence a cash tender offer for shares of Hollywood. Specific
forward-looking statements relate to the anticipated terms of and matters
relating to the tender offer and its financing, the anticipated impact of the
transaction on Blockbuster's financial results, the anticipated benefits to
Blockbuster's and Hollywood's shareholders that could result from the
transaction and matters related to Blockbuster's operations including any
reduction of capital expenditures on store openings and remodels, integration
of any online offering with stores and further expansion of services. These
forward-looking statements are based on Blockbuster's current intent,
expectations, estimates and projections and are not guarantees of future
performance. These statements involve risks, uncertainties, assumptions and
other factors that are difficult to predict and that could cause actual results
to vary materially from those expressed in or indicated by them. In addition,
some factors are beyond Blockbuster's control. Certain of the statements made
in this release are contingent upon receipt of cooperation from Hollywood's
board of directors and the completion of the proposed acquisition discussed
above. Blockbuster can give no assurance that the proposed acquisition,
including the tender offer, will be completed. Other factors that could cause
actual results to differ materially from the statements made in this release
include, among others: (i) Blockbuster's and Hollywood's ability to receive
all necessary approvals, including any necessary governmental or regulatory
approvals and the approval of the respective Board's of Directors and
stockholders, if applicable; (ii) Blockbuster's ability to close the financing
necessary for the tender offer; (iii) changes to Blockbuster's strategy,
business plan and pricing model, including its plans regarding use of capital
and any related impact on Blockbuster's offer price; (iv) consumer demand for
Blockbuster's planned product and service offerings; (v) the variability in
consumer appeal of the movie titles and games software released from rental and
sale; (vi) Blockbuster's ability to respond to changing consumer preferences
and to effectively adjust its product mix, service offerings and marketing and
merchandising initiatives; (vii) Blockbuster's ability to successfully
integrate Hollywood's operations with its own upon completion of the proposed
acquisition; (viii) Blockbuster's ability to timely implement and maintain the
necessary information technology systems and infrastructure to support shifts
in consumer preferences and any corresponding changes to Blockbuster's
operating model, including changes related to the proposed transaction; (ix)
the extent and timing of Blockbuster's continued investment of incremental
operating expenses and capital expenditures to continue to develop and
implement its initiatives; (x) vendor determinations relating to pricing and
distribution of their product and Blockbuster's ability to reach agreements
with service, product and content providers on acceptable commercial terms; and
(xi) other factors as described in filings with the Securities and Exchange
Commission, including the detailed factors discussed under the heading
"Cautionary Statements" in Blockbuster's annual report on Form 10-K for the
fiscal year ended December 31, 2003 and discussed under the heading "Disclosure
Regarding Forward-Looking Information" in Blockbuster's quarterly report on
Form 10-Q for the fiscal quarter ended September 30, 2004.
As of the date of this press release, Blockbuster beneficially owns 1,000
shares of Hollywood common stock, in order to give Blockbuster certain
stockholder rights under Oregon law.
DATASOURCE: Blockbuster Inc.
CONTACT: press, Karen Raskopf, Senior Vice President, Corporate
Communications, +1-214-854-3190, or analysts-investors, or Mary Bell, Senior
Vice President, Investor Relations, +1-214-854-3863, or Angelika Torres,
Director, Investor Relations, +1-214-854-4279, all of Blockbuster Inc.
Web site: http://www.blockbuster.com/