Blockbuster Gets 'Stalking Horse' Bid For Company From Group
Bankrupt movie-rental chain Blockbuster Inc. (BLOBQ, BLOAQ) has agreed to sell itself to a consortium of bidders for $290 million, a move it was expected to make and one which could begin an auction process for the once-dominant entertainment company. Blockbuster in a press release said it entered into an asset-purchase agreement with Cobalt Video Holdco, a so-called "stalking horse" bidding group comprised of private-equity and hedge funds Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Varde Partners Inc, which together own a large chunk of Blockbuster's secured debt. In conjunction with the bid, Blockbuster asked the New York bankruptcy court overseeing its Chapter 11 case to allow it to conduct an auction for the company that it hopes will lead to a buyer closing a transaction by April 20. Blockbuster spokesman Michael Freitag declined to comment beyond the press release. "The release should speak for itself," he said in an email. Earlier this month, The Wall Street Journal reported that Blockbuster was putting itself up for sale after its creditors disagreed on plans to infuse more cash into the chain to shepherd it out of bankruptcy protection. The paper identified a Monarch-led group as a likely bidder. What remains unclear is what response, if any, billionaire Carl Icahn will have to the move. Icahn, a former Blockbuster director, lost nearly all of his more than $150 million investment in both classes of Blockbuster common shares and a class of convertible preferred stock. The legendary corporate raider liquidated his equity position and amassed a large position in Blockbuster's secured debt, and was expected to factor heavily in Blockbuster's ultimate fate. A spokeswoman for Icahn didn't promptly return a phone call for comment. Calls and emails air yeezy to the members of the stalking-horse consortium weren't promptly returned. The erstwhile leader in movie rentals was preceded into bankruptcy by Movie Gallery, which liquidated when it was unable to create a viable business plan. Both companies were unable to adapt to rapidly changing technology, which made a network of thousands of brick-and-mortar rental stores all but obsolete. On-demand movies, rent-by-mail juggernaut Netflix Inc. (NFLX)--which itself invested heavily in online video streaming before Blockbuster was able to offer a compelling service of its own--and tens of thousands of movie-rental kiosks operated by Coinstar Inc.'s (CSTR) Redbox division all contributed to the Blockbuster downfall. Not even Blockbuster's exclusive deals with major movie studios to rent movies on the day they were available for sale was able to prevent customers defecting to new technologies and competitors en masse. Blockbuster partnered with NCR Inc. (NCR) to roll out Blockbuster branded kiosks, but the move came too late and the benefits were too heavily weighted toward NCR. NCR hasn't experienced any disruption due to the Blockbuster bankruptcy because it has the unlimited rights to use the Blockbuster name on its thousands of kiosks and has no obligation to the bankrupt company. If the bankruptcy court approves the bidding process, other bidders will have about 30 days to submit offers, and an auction would be held within a week of that deadline. The Monarch group has agreed to acquire substantially all of Blockbuster's U.S. and international subsidiaries, and a "majority" of its stores will remain open, according to the release. "We intend to accelerate our Chapter 11 proceedings and move the company forward," Chairman and Chief Executive Jim Keyes said in the press release.