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UPDATE: Icahn Blasts Antioco, Threatens Blockbuster Board Takeover

7 Apr, 2005 By: Jessica Wolf

The day after blasting Blockbuster Inc. CEO John Antioco for his “unconscionable” compensation package and “spending spree” mentality with shareholder money, maverick investor Carl Icahn submitted himself on a list of three nominees for board positions up for re-election at the annual shareholder meeting May 11.

Other board nominees in filings with the Securities Exchange Commission included Edward Bleier, retired former president of Warner Brothers Entertainment’s pay TV division, and Strauss Zelnick, former president and CEO of German music conglomerate BMG Entertainment.

Icahn, Blockbuster’s largest individual shareholder with almost 17 million shares, or more than 17 percent of outstanding stock, has said he would consider an attempt to take over the board in 2006.

Icahn, who is also the largest individual shareholder of rival Hollywood Entertainment Corp., has said he would prefer a board that controlled “further egregious bonuses,” and paid out greater shareholder dividends.

Yesterday, in a letter filed with the SEC, Icahn struck out at Antioco for his reported salary, for failing to take over Hollywood Entertainment Corp. and for refusing Icahn’s requests to postpone the scheduled May 11 shareholder meeting. The irate shareholder also threatened to attempt a Blockbuster board of directors takeover in 2006 if his complaints aren’t addressed.

In the letter Icahn accused Antioco of going on a “spending spree with shareholders' money.”

Two weeks ago, Blockbuster reported Antioco’s total 2004 compensation of approximately $7.2 million, which doesn’t include another $5 million in stock options and $28 million in restricted stock. The total package could be worth an estimated $51 million once all options are exercised, which Icahn today called “unconscionable.”

A Blockbuster spokesperson responded saying Icahn was heavily invested in the company’s hostile acquisition bid for Hollywood, which he said didn’t happen for reasons “outside of our control.”

“He’s looking for a short-term payback; our goal is to build longterm shareholder value,” said the spokesperson. What happens next depends on what Icahn’s really trying to accomplish, said Dennis McAlpine, independent retail analyst for McAlpine Associates.

Icahn stood to gain plenty of cash had a Blockbuster takeover of Hollywood happened; he could be trying to stir up interest and raise Blockbuster’s stock price so he can sell, McAlpine said.“Or he might be trying to get Blockbuster to buy him out,” he said.

Calls to Icahn’s office were not returned by press time.Blockbuster’s share price rose about 6.2 percent to $9.71 by the end of trading on April 7.

Blockbuster’s next move “depends on how they want to play the game,” McAlpine said. “It could become very confrontational.”

As for Icahn’s threat to attempt to take over control of the Blockbuster board of directors at the 2006 annual meeting, McAlpine said it’s a possibility “he won’t even be around by then.”

Shortly after Blockbuster dropped its bid for the No. 2 chain, Icahn, March 31, purchased 1 million shares of Hollywood common stock at $13.15 per share, also making him Hollywood’s largest shareholder.

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