Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



This Offer Is No Blockbuster

Why didn't shares of video rental chain Hollywood Entertainment (Nasdaq: HLYW  ) move much yesterday on news that Blockbuster (NYSE: BBI  ) plans to make a tender offer for its shares next month if it can't hammer out a deal with Hollywood's board? Because Blockbuster bid below the current value of the company's shares, that's why.

Hollywood investors are in an awkward position. At least three parties want to buy the company: Blockbuster, Movie Gallery (Nasdaq: MOVI  ) , and a group including Hollywood Chairman Mark Wattles -- the latter of which started the "run" on Hollywood's rights with a going-private offer earlier this year. (Of course, the Wattles group subsequently cut the value of its offer substantially, which effectively opened hunting season.)

As of this writing, then, Hollywood faces the following choices: a below-market offer from its own chairman that it's already agreed to; an undisclosed offer from Movie Gallery; and a better-than-Wattles, but still below-market offer from Blockbuster that comes with a threat of sorts attached. (By threat, I mean that if Hollywood doesn't dump its chairman, Blockbuster intends to go straight to the company's shareholders.)

This can't be encouraging for Hollywood stockholders. Lots of folks seem to think they can pick the company up on the cheap -- Blockbuster, at least, has taken the odd step of saying it would boost its offer under the right circumstances.

I wouldn't want to have a long-term bet on the rental industry these days: Hollywood and its ilk are beset on all sides by on-demand digital rentals, plentiful and relatively inexpensive retail sales, and innovators like currently strugglingNetflix (Nasdaq: NFLX  ) , as well as traditional competition. The big rental players are probably right to look for quick fixes in the form of revenue- and profit-boosting buyouts, and we're seeing that play out in front of us.

The fact that all these managers are actually looking for a deal, rather than splashing out outsized dollars for Hollywood, should cheer investors in any aforementioned company save Hollywood itself -- at least for now. Long-term, the lack of outward enthusiasm is about as depressing as the prospect of more Hayden Christensen next year.

Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 504679, ~/Articles/ArticleHandler.aspx, 10/25/2016 1:21:01 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,179.25 -43.78 -0.24%
S&P 500 2,144.23 -7.10 -0.33%
NASD 5,283.47 -26.36 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/4/2010 3:59 PM
BLOKA.DL $0.19 Up +0.01 +0.00%
Blockbuster, Inc. CAPS Rating: *
NFLX $127.11 Down -0.22 -0.17%
Netflix CAPS Rating: ***