NEW YORK (Reuters) -
Blockbuster Inc. is dropping its nearly $1 billion hostile bid to acquire Hollywood Entertainment Corp. by not extending its expired tender offer, citing difficulties in getting regulatory approval in time.
Blockbuster (Research), the nation's biggest movie rental chain, said its offer, which values Hollywood shares at $14.50 in cash and stocks, expired at midnight and would not be renewed. All tendered shares and notes will be promptly returned to holders, Blockbuster said.
Hollywood has accepted an $850 million offer from smaller rival Movie Gallery Inc. (Research) The U.S. Federal Trade Commission has cleared that deal and is preparing to go to court to stop Blockbuster's bid because of antitrust concerns, sources close to the case told Reuters last week.
Hollywood (Research) shares finished at $14.13 on Thursday, above the $13.25 per share offered by Movie Gallery but lower than Blockbuster's offer.
Hollywood is a distant second to Blockbuster in the movie rental business. Movie Gallery is No. 3.
Blockbuster said in a statement that it was not in its best interest to continue to pursue the acquisition of Hollywood Entertainment.
It cited Hollywood's recent public filings and the unlikelihood of obtaining regulatory clearance on an acceptable timetable for its decision. A Blockbuster spokesman said the company has no additional comments beyond the statement.
Hollywood planned to hold its annual shareholders meeting by March 30, at which it may ask for a vote on proposed takeover by Movie Gallery. Hollywood is not immediately available for comment.
"We look forward to closing the Hollywood transaction promptly," Joe Malugen, CEO of Movie Gallery, said in a statement. "With a broader geographic presence and greatly improved distribution capabilities and scale, our combined company will be a strong competitor."
Mark Wattles, a former Hollywood Entertainment Corp. chief executive, has sought to buy up to half of Hollywood's stores to help win U.S. approval of a takeover by Blockbuster Inc. Wattles, who owns 9.6 percent of Hollywood's outstanding shares, resigned as CEO in February amid the bidding battle.
Blockbuster has offered $14.50 for every Hollywood share, including $11.50 in cash and $3.00 in Blockbuster common stock.
For a run down of recent completed deals, click here.