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Hollywood Terminates Leonard Green Merger Deal

25 Jan, 2005 By: Erik Gruenwedel

As expected, Hollywood Entertainment has officially terminated its Oct. 13, 2004 amended merger agreement with Carso Holdings, a group of investors led by Hollywood founder and CEO Mark Wattles, and backed by financial restructuring firm Leonard Green & Partners.

Earlier this month, Hollywood announced it had agreed to a merger deal with Movie Gallery valued at $1.2 billion, or $13.25 a share plus assumption of $350 million in debt.

The merger would create the second-largest rentailer, with more than 4,400 stores, 700 Game Crazy video game outlets and annual revenue of approximately $2.5 billion.

Separately, No. 1 video rental chain Blockbuster Video said it maintains interested in acquiring Hollywood.

Under terms of the Carso deal — valued at $656.9 million, or $10.25 per share of common stock plus $32.5 million payable to holders of options to purchase additional shares — Hollywood agreed to pay Green a $4 million termination fee.

Gallery would receive a $27 million fee should its acquisition bid be surpassed by a superior offer.

Such fees are typically designed to compensate a bidding company for time spent consummating a deal, while at the same time thwarting rival offers.

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