Entertainment Industry

« Previous | Company Town Home | Next »

Bidders including Dish Network and Icahn lining up for Blockbuster auction Monday

BlockClose By next week, troubled home entertainment company Blockbuster Inc. might be in the hands of a famed Wall Street investor, a satellite TV company, a South Korean telecom firm, a group of hedge funds or another buyer.

On Monday, the DVD-rental chain that was once the biggest name in American home entertainment will go up for auction after a planned reorganization under Chapter 11 bankruptcy protection failed when its financial performance deteriorated faster than expected.

Blockbuster has fallen behind fast-growing competitors like Netflix and Redbox, and has been unable to support a nearly $1-billion debt load. The Dallas company will soon find itself with new owners, who will either attempt to revive the brand or maximize profits as its business continues to shrink.

Among the likely bidders expected to take part in the auction are billionaire corporate raider Carl Icahn, satellite TV company Dish Network and South Korean firm SK Telecom. A group of Blockbuster creditors including Monarch Alternative Capital, Owl Creek Asset Management, Stonehill Capital Management and Varde Partners previously submitted an opening bid of $290 million to set a minimum value.

A person close to the process said five to 10 suitors are expected to make offers. Richard Kanowitz, an attorney for Blockbuster’s unsecured creditors, confirmed that more than two bids had already been submitted.

Icahn, who owns a substantial amount of Blockbuster’s debt, will make a bid, possibly with a partner that could help shut down more stores and liquidate some of the company’s assets, according to someone familiar with the investor’s plans.

Icahn previously owned Blockbuster stock and was on its board of directors, but exited by early 2010. Icahn did not return a call seeking comment.

A person close to Dish Network said the company had been in talks with Blockbuster and was considering a bid. The Wall Street Journal reported Friday that Dish had submitted an offer. A spokeswoman declined to comment.

SK Telecom was also interested in Blockbuster as of earlier this week, another person close to the situation said.

Bidders are allowed to make offers only for certain Blockbuster assets, such as its U.S. or overseas stores or its digital business. The company could be carved up, or bidders for different assets could join together.

When Blockbuster filed for bankruptcy in September, its creditors presented a plan to transform its debt into equity, close 500 to 800 of its 3,425 stores and allow it to emerge from bankruptcy by early 2011. That plan valued the company at about $500 million, a knowledgeable person said.

However, after Blockbuster’s financial results over the holiday period were worse than expected, many creditors gave up on the reorganization plan and withdrew a credit facility. Icahn disagreed, leading to his split with the creditors group that submitted the opening bid for Blockbuster.

Chris DiMauro, a managing director at consulting firm Houlihan Lokey who is working with that group of creditors, said they were hoping that the bids would go higher than $290 million but were ready to take control of Blockbuster if needed.

“We are comfortable the assets have a value at least equal to what we are offering to pay,” DiMauro said. However, he added that Blockbuster would have to reorient itself from a business that is “all things to everyone” into one that serves a “niche audience.”

Blockbuster has closed roughly half its stores in the U.S. over the last six months and now has 1,751, a spokesman said.

A new owner probably will have to close more stores to move the company forward, said Ryan Kugler, chief executive of DVA Inc., a seller of used DVDS and other entertainment media.

“There are stores that still do good business with people who don’t own an iPad,” he said. “But that’s probably going to last five to seven years.”

--Ben Fritz

Photo: Corey Hawkins, of Hawkins Sign, hangs a new banner at the Blockbuster store in Arlington, Texas going out of business.

 
Comments () | Archives (5)

What would anyone what Blockbuster for? The VHS tapes, the DVD's, or maybe even the old Beta tapes? The name has become senomenious (sp) with behind the times so why?

Let Blockbuster go out of business. People are renting through Netflix and Redbox now.

Dear My opinion means nothing: Blockbuster is a more than just a pile of DVDs and VHS Tapes. Is is thousands of choice retail locations, contracts with large media corporations, trademarks and intellectual property - items of real value. Unfortunately, it is also the hard-working people that make Blockbuster work - something that does not positively fit into the value equation.

how in the world did a company selling and renting dvds for a dollar, out of a little red box at a gas station able to put a billion $ enterprise out of business, BB should have seen this and beat redbox at there on game.i blame it on the owners lack of doing anything before red box took off,i just saw the first BB rent box at a gas station 6 months ago... TOOOO LATE!!!!!!!!!!!!!!!! instead of renting dvds or going to movies the movies are on the net at a p2p site i just make my own i guess thats what people are also doing..soon the internet will be our movie theater and dvd store and all will be out of business.././

torrent sites will put all out of business eventually redbox will fall also... NOSTERDAMUS PREDICTION


Advertisement
Connect

Recommended on Facebook


In Case You Missed It...


Photos: L.A.’s busiest filming sites

Video





Categories

Companies


Archives