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Movie Gallery Gets OK for Hollywood Buy

Associated Press
Published | Updated

DOTHAN, Ala. – Movie rental chain Movie Gallery Inc. (MOVI) has passed a regulatory review of possible antitrust issues in its bid to acquire larger rival Hollywood Entertainment Corp. (HLYW), which is also the target of a takeover bid from industry leader Blockbuster Inc. (BBI).

Movie Gallery, the nation's third-largest movie rental chain, said Monday its offer had cleared the waiting period required under federal antitrust law without objections from regulators.

"We are pleased with this important development and we believe that the Movie Gallery merger is the best option for Hollywood's shareholders, employees and customers," said Page Todd, executive vice president and general counsel of Movie Gallery.

"Clearing the pre-merger review process confirms what we have said all along — Movie Gallery stores do not have any substantial overlap with Hollywood's stores and therefore pose no risk to competition," he said. "In contrast, we believe that Blockbuster's proposal poses significant regulatory risk, as more than 80 percent of Hollywood's stores are in the same local market as a Blockbuster store."

Movie Gallery announced Jan. 25 it had entered into a definitive merger agreement to acquire Hollywood, the nation's second biggest movie rental chain, for $13.25 per share in cash, or about $900 million, subject to approval by regulators and Hollywood's shareholders.

But Dallas-based Blockbuster, the nation's largest movie rental chain, subsequently said it would pay nearly $1 billion in cash and stock for Hollywood Entertainment, which is based in Wilsonville, Ore., near Portland.

Movie Gallery's statement Monday noted that Blockbuster's bid for Hollywood is still under investigation by the Federal Trade Commission (search). Unlike Movie Gallery, Blockbuster was asked to provide additional information to the FTC, requiring it to wait an additional 30 days before it can move forward with its offer, unless the FTC or a court intervenes, the statement said.

Hollywood Entertainment shares fell 17 cents to $14.10 on the Nasdaq Stock Market while Movie Gallery shares slipped 4 cents to $21.38. Blockbuster shares fell 13 cents to $9.27 in trading on the New York Stock Exchange (search).