Do companies always act in the best interests of their shareholders? Hollywood Entertainment's
Why would any sane board urge its shareholders to take Movie Gallery's $13.25-a-share offer over Blockbuster's $14.50? Could it be because the Blockbuster bid was hostile? You'd be warm if your head was nodding.
Hollywood Entertainment is pointing to the fact that a Blockbuster merger may not cut the mustard with the Federal Trade Commission. With the sorry state of video store rentals these days, can anyone really see this happening? An elephant's graveyard is no place for the FTC.
The popularity of mail-delivered DVD rentals by companies such as Netflix
Ten years ago, Blockbuster and Hollywood hooking up would have been a dicey regulatory proposition. These days it's like getting in the way of the two biggest vinyl record traders in the era of the compact disc. If that's the only card in Hollywood's anti-Blockbuster hand, it's better off folding.
Nudging its shareholders toward a lower offer isn't just bad business -- it's also ripe with bad karma. Back in March the company was set to be taken private for $14 a share before the deal fell apart over the summer. Accepting a deal greater than the original sum would be the best way to reward shareholders who held through the company's recent travails. Unless Movie Gallery is willing to sweeten its offer -- if only to force Blockbuster to raise the ante to the point where it overpays (no, wait -- it's willing to overpay already) -- Hollywood better give its shareholders a better reason not to make it a Blockbuster night.
Want to rewind back to your favorite scenes?
- Read about Hollywood's original $14 offer.
- Check out the online rental price war.
- Ask yourself whether canceling late fees is a good idea.
Longtime Fool contributor Rick Munarriz thinks that video rental companies battling for one another is like watching kids fight over piñata remnants. He owns shares in Netflix. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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