The head of Hollywood Entertainment Corp. abruptly resigned a day after Blockbuster Inc. announced a hostile bid of nearly $1 billion for its smaller movie rental rival, which has already agreed to be acquired for less by a third rental industry player, Movie Gallery Inc.
Hollywood Entertainment, which trails only Blockbuster in the U.S. movie rental business, said Thursday that founder Mark Wattles has resigned as its chief executive and chairman. The company didn’t cite a reason for his departure in a brief news release.
F. Bruce Giesbrecht, Hollywood’s president and chief operating officer, was named chief executive, but the company didn’t name a replacement as chairman.
Hollywood Entertainment referred calls to a New York merger consulting firm, MacKenzie Partners, which did not have any immediate comment.
The personnel moves come a day after Dallas-based Blockbuster said Wednesday it would offer $14.50 per share in cash and stock for Hollywood, or about $985 million based on Hollywood’s outstanding shares and options.
Hollywood agreed last month to a takeover by Movie Gallery, the nation’s third-largest movie-rental company, which offered to pay $13.25 cash per share, or about $900 million. Both suitors would assume $350 million in Hollywood debt.
A spokeswoman for Movie Gallery, based in Dothan, Ala., said company executives were meeting Thursday morning and could not immediately comment.
In Thursday’s statement, Hollywood said a special committee of its board was considering the offer from Blockbuster and would advise its shareholders of its recommendation by Feb. 17. The company urged shareholders to make no decision until then.
Hollywood, which is based in Wilsonville, Ore., has rejected Blockbuster’s advances over the past several months, including an offer of $11.50 per share in cash. Blockbuster’s new hostile tender offer would begin Friday and run through March 11 and consist of $11.50 in cash and $3 in its own stock for each Hollywood share.
Analysts said Movie Gallery could argue that its offer is still superior because Blockbuster might have more difficulty winning approval for a deal from antitrust regulators. Blockbuster said Wednesday it had received a request for more information on its proposal from the Federal Trade Commission.
“I’m sure Hollywood shareholders would have preferred all cash” from Blockbuster, said Arvind Bhatia, an analyst with Southwest Securities Inc. “I don’t think this is the last word. There is more to come.”
Dennis McAlpine, an analyst for McAlpine Associates, said Movie Gallery could counter Blockbuster’s offer or hope that the FTC sinks Blockbuster’s bid. “If I were a (Hollywood) shareholder, I’d sell,” he said.
A combination of Hollywood Entertainment and Movie Gallery would create a chain with about 4,500 stores and annual revenue of about $2.5 billion, still far behind Blockbuster, which has about 9,000 stores worldwide.
All three chains face growing competition from online movie-order services, including Netflix Inc. and Wal-Mart Stores Inc.