Icahn Wins Blockbuster Board Victory

Billionaire activist investor Carl Icahn (search) and his two dissident nominees appear to have been voted onto the board of Blockbuster Inc. (BBI), ousting Chairman John Antioco (search), the company said Wednesday, sparking a 4 percent jump in its stock.

"It's fair to say that it appears the dissidents have or will be officially elected," Ed Stead, Blockbuster general counsel, said on the sidelines of a shareholder meeting at the company's Dallas corporate headquarters.

He said the board would vote on a resolution at a yet undetermined date to pave the way to reappoint Antioco to the board. But whether Antioco would accept the offer is uncertain as he recently threatened to quit Blockbuster if he lost his board seat.

Blockbuster (search) said it could take days to know the official results of the voting. Icahn was not immediately available to comment.

The vote was essentially a referendum on whether to oust Antioco and two company-backed candidates from the board of directors, in favor of Icahn and his two dissident nominees, he says could help revive profit and sales.

By the time the company provided comment on preliminary results, Icahn had not made any appearance at the meeting hall, packed mainly with Blockbuster employees.

"I'd be lying if I told you this was a happy day because it's not," Antioco said at the meeting. He said he believed he has charted the right strategy for the company.

Michael Pachter, an analyst at Wedbush Morgan Securities Inc., said, "all eyes now should be on what Antioco does next," and whether he would accept a reappointment when it came.

"If Antioco remains in charge of the company with five board votes versus three for Icahn, if they added a seat and put him on, that would attract one type of investor — someone who's looking for growth.

"If Antioco leaves and doesn't accept the reappointment, then I think Icahn will likely take control, whether he has the votes or not, he'll still have control and the company would not be run for growth but for current generation of cash, which would attract a different type of investor," Pachter said.

His counterpart at Southwest Securities Inc., Arvind Bhatia, said, "a lot of investors were looking for a watchdog on the board," perhaps helping the stock edge higher.

Pachter said the stock jump could also be as a result of hope that the company would now put a break on spending, raising prospects for dividend outs and even a share buyback.

The public battle between Antioco and Icahn has grown fierce in recent days as each side has called the other ill-equipped to stem the company's slide in the rapidly changing video market.

Icahn, the 69-year-old financier who once took over defunct airline Pan Am, and who only weeks ago squeezed an extra $3 billion in share buybacks from oil company Kerr-McGee (KMG), nominated himself and two veteran entertainment executives to the Blockbuster board of directors because of what he has called Antioco's "spending spree."

Shareholder groups Institutional Shareholder Services and Glass Lewis & Co. weighed in with criticisms of Blockbuster management and backed Icahn's candidates, Edward Bleier and Strauss Zelnick, but not Icahn himself, for the board.

Blockbuster triggered Icahn's wrath after its planned purchase of No. 2 video chain Hollywood Entertainment Corp. (HLYW) fell apart earlier this year. Icahn, who owns about 9.8 percent of Blockbuster, had also taken a large stake in Hollywood, and blamed Antioco for the deal's failure.

Antioco has defended the company's aggressive strategy of shifting toward online rentals to take on popular rival Netflix Inc. (NFLX)

He threatened resignation as CEO would make him eligible for $54 million in severance payments.

Icahn called Antioco's severance package "unconscionable" and said even with three board members he would have only a minority voice on the board. Icahn claims he only wants to curb excessive compensation packages and speak out against poor business plans.

Blockbuster has struggled in recent years, posting 2004 losses of $1.2 billion as fewer customers shopped in retail outlets for video rentals.

The company launched its "No late fees" campaign to lure customers back to its 9,000 stores, even as it spends $120 million this year to build its Internet operations. But its Internet strategy will take time, since its online customers number only a quarter of Netflix's 3 million subscribers.

In afternoon trading, Blockbuster shares were up 21 cents at $10.05, after rising earlier as high as $10.25 immediately following news Icahn and his two nominees had likely won the board seats.