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A Time Out in the Hollywood Bidding Game

6 Feb, 2005 By: Kurt Indvik

The bidding game for Hollywood Entertainment is entering a new period with Blockbuster's now (and finally) formal offer for Hollywood of $11.50 cash per share plus another $3 per share paid in Blockbuster stock. Before this Blockbuster had been playing its hand mostly in the public media and goading other possible suitors into action. Now, with Movie Gallery's $13.50 in cash per share offer accepted by Hollywood's board of directors, and an obvious belief that federal agencies will not put antitrust barriers in its way, Blockbuster feels ready to make its play with a direct offer to shareholders.

Hollywood's board of directors is expected to make some call in favor or against the offer on or before Feb. 17, while the Federal Trade Commission reviews Blockbuster's bid. The FTC is expected to make a decision on Big Blue's offer by March 7.

Hollywood closed down a fraction of a percent at $14.25 per share on NASDQ at the close of trading last Friday.

Analysts feel that Movie Gallery will hold to its offer of $13.50 in cash per share of Hollywood stock until the March 7 deadline to see if Blockbuster clears FTC antitrust concerns. If Big Blue passes federal review muster, which some analysts seem to think is probable, then my guess is it'll be back to the bidding war and we may see a counteroffer from Movie Gallery. Of course, if the Hollywood board backs away from Movie Gallery's deal and encourages stockholders to take the Blockbuster offer, then we may see Joe Malugen and crew come back with a counter move earlier than March 7.

Either way, I don't think we have seen the ceiling on the bidding yet, as both companies struggle to weigh the gains of such an acquisition, or the losses should the other party win the bidding game.

A month will tell who wants to win more.

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