Update: Icahn Urges Blockbuster Sale, Antioco Fires Back19 Apr, 2005 By: Erik Gruenwedel
Carl Icahn (L) and John Antioco
Blockbuster Inc.'s largest shareholder, Carl Icahn, today said the No. 1 video rental company should be put up for sale, according to filings with the Securities and Exchange Commission.
The maverick investor, who owns 9.7 percent of Blockbuster common stock and 7.7 percent of preferred stock, issued few details on his reason for a Blockbuster sale in the proxy amendment.
Blockbuster spokesperson Randy Hargrove said the company is always open to considering legitimate offers.
“If Mr. Icahn has or knows of any legitimate offers, please send them our way,” Hargrove said.
He said Blockbuster informed Icahn that former parent Viacom considered numerous alternatives for its separation with Blockbuster, which included extensive discussions with financial investors about a potential sale of Blockbuster.
Icahn, who was not available for comment, last week told The Wall Street Journal he has no desire to “micromanage” Blockbuster despite misgivings about the company's belated challenge of Netflix and decision to drop late fees.
Analyst Michael Pachter, with Wedbush Morgan Securities in Los Angeles, said Icahn's actions are merely posturing.
“He doesn't seem like a buyer,” Pachter said. “If he thinks it has so much value, he could buy it and resell it. But no buyout firm wanted to buy [Blockbuster] at [$7 per share], so I don't know why a buyout firm would want to buy it at $10.”
The war of words between Blockbuster John Antioco and Icahn heated up a bit Monday when the chairman and CEO reiterated in a letter to shareholders Big Blue's business strategy, which he said is aimed at revitalizing its core rental business and developing alternative revenue sources.
Icahn, in a letter to shareholders April 7, blasted Antioco for a litany of woes, including his salary, failure to take over Hollywood Entertainment Corp., ‘spending spree' mentality with shareholder money and refusal to postpone the scheduled May 11 shareholder meeting. He also demanded an immediate $330 million cash dividend to shareholders.
Icahn then submitted himself on a list of three nominees for board positions up for re-election at the shareholder meeting.
Antioco called Icahn's spendthrift accusations ‘simply wrong,' saying Blockbuster has cut capital spending in this year more than $100 million, in addition to reducing corporate overhead by $70 million.
He said shelling out a $330 million dividend to shareholders would be financially irresponsible in light of a declining rental market and last year's $5 per share one-time dividend payout.
“We truly believe that following such a course would be tantamount to a liquidation strategy and destructive to shareholder value,” Antioco said in the letter.
He chided Icahn's claim that acquisition offers for Blockbuster don't ‘see the light of day,' saying the company is always willing to entertain legitimate offers.
Antioco said his reported $51 million compensation package included elements that had not yet been earned and was designed, in accordance with the board of directors, to be paid out over five years ‘to align my interests with the interests of Blockbuster's shareholders.'
Blockbuster apparently isn't taking chances on the upcoming board elections as evidenced by the “Vote No on Icahn” symbol on its Web site that links to Antioco's letter.