Movie Gallery Receives Regulatory Clearance for Hollywood Merger14 Feb, 2005 By: Holly J. Wagner
Movie Gallery has won regulatory clearance for its proposed merger with Hollywood Video, the company announced today.
“We are pleased with this important development, and we believe that the Movie Gallery merger is the best option for Hollywood's shareholders, employees and customers,” said Movie Gallery EVP and general counsel Page Todd. “Clearing the pre-merger review process confirms what we have said all along — Movie Gallery stores do not have any substantial overlap with Hollywood's stores and, therefore, pose no risk to competition. In contrast, we believe that Blockbuster's proposal poses significant regulatory risk, as more than 80 percent of Hollywood's stores are in the same local market as a Blockbuster store."
Blockbuster did not immediately respond to a request for comment.
Movie Gallery has offered $13.25 per share in cash to buy Hollywood and would assume Hollywood's debt if the transaction goes through. Blockbuster has gone directly to shareholders with an offer of $11.50 in cash and $3 in Blockbuster stock for each share of Hollywood stock exchanged.
"We are confident that our all-cash acquisition of Hollywood provides greater closing certainty and will deliver concrete value to Hollywood shareholders sooner than Blockbuster's highly conditional proposal," Todd said.
Blockbuster is responding to a request for additional information from the Federal Trade Commission (FTC) in connection with its acquisition proposal.
Citing sources close to the review, the Wall Street Journal reported this morning that regulators are taking a dim view of a possible Blockbuster-Hollywood pairing, fearing such a merger would drive video rental prices up. The FTC has been hiring outside economic experts and taking sworn depositions from Blockbuster executives, according to the Journal.
Since Blockbuster's proposal includes consideration in the form of Blockbuster shares, under the HSR Act, it must wait an additional 30 days after it has substantially complied with the FTC's Request for Additional Information before it can move forward with its proposed offer unless either the FTC terminates the waiting period or a court refuses to grant a permanent injunction.
Shareholders of record Feb. 16 will be allowed to vote on the proposal. A special committee of Hollywood's board has said it will make a statement the following day either endorsing one of the offers or declining to endorse any present offer.