Hollywood Board Reportedly Favoring Privatization9 Dec, 2004 By: Erik Gruenwedel
If the oft-reported foibles within the movie industry are any guide, Hollywood Entertainment Corp.'s muddled attempts to go private are right on script.
The Wilsonville, Ore.-based No. 2 video rental chain's board of directors, according to Reuters, has urged shareholders to support a $10.25-per-share bid from a group of investors led by Hollywood founder and CEO Mark Wattles and backed by financial restructuring firm Leonard Green & Partners — despite outstanding superior offers from No. 1 chain Blockbuster and No. 3 Movie Gallery.
Movie Gallery's largely stock bid reportedly rivaled Blockbuster's $11.50 per share, or a $700 million cash offer; Wattles and Co.'s proposal is almost 27 percent less than their original $900 million offer last summer.
In a related move, investor Carl Icahn last week purchased 5.1 million shares of Hollywood, representing more than 8.4 percent of the company, for $60 million.
The ongoing proliferation of DVD sellthrough and online rental subscription services led many observers to believe that Blockbuster & Co. are chasing a rental market well past its prime.
Despite repeated calls, Hollywood wasn't talking, and rampant distrust continued to emanate from some shareholders as well as incredulity from analysts.
“If they really did say that, clearly there are going to be some major shareholder lawsuits,” said retail analyst Dennis McAlpine with McAlpine & Associates, Scarsdale, N.Y. “Mr. Icahn is not going to play around with that game.”
Dolphin Limited Partnership, a Stamford, Conn.-based holder of 1.9 million Hollywood shares, has made no secret of its dissatisfaction with Hollywood's board and urges that consideration of all acquisition proposals be conducted in a fair and evenhanded manner.
“[Hollywood's board] better have a good investment banker's opinion,” McAlpine said. “It's not the sort of thing I would expect an independent board to say.”