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Blockbuster weighs new Hollywood bid

/ Source: The Associated Press

Blockbuster Inc., the nation's largest movie-rental chain, said Tuesday it is still interested in buying Hollywood Entertainment Corp., despite its smaller rival's agreement last week to be purchased by another competitor, Movie Gallery Inc., for about $850 million.

John Antioco, Blockbuster chairman and chief executive, said his Dallas-based company was evaluating making a new offer, a signal the bidding could still go higher.

Blockbuster also said that antitrust regulators had asked for more information about its offer to buy Hollywood Entertainment, which the company expected to provide by the first week of February.

Antioco said he was disappointed that a special committee of Hollywood Entertainment's board accepted an offer from Movie Gallery "without giving Blockbuster a fair opportunity to participate in the auction process."

Hollywood Entertainment has refused to open its books to Blockbuster unless it agreed not to launch a hostile takeover for three years. Blockbuster, which said it needed to see the information to determine a fair price for its smaller rival, rejected the condition.

Movie Gallery, based in Dothan, Ala., the nation's third-largest movie-rental chain, agreed last week to pay $13.25 per share in cash for No. 2 Hollywood Entertainment and assume about $350 million in debt. That trumped Blockbuster's previous bid of $11.50 per share.

Antioco said it no longer made sense for Blockbuster to begin a previously threatened hostile takeover of Hollywood Entertainment at the $11.50 per share price, but he said Blockbuster was considering the price it would be willing to offer taking other factors into account, including a termination fee to Movie Gallery that is included in the deal with Hollywood Entertainment.

Shares of Hollywood Entertainment, based in the Portland, Ore., suburb of Wilsonville, have moved above Movie Gallery's offered price, indicating investors expect a bidding war.

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.