The deal will give Movie Gallery about 2,000 Hollywood Video stores, bringing its total to 4,500 units in North America. Company officials expect to close the deal in this year's second quarter.
The transaction tops frontrunner Blockbuster Inc.'s offer to acquire Hollywood for $11.50 per share, as well as private equity firm Leonard Green & Partners' $10.25 proposal, to which Portland, OR-based Hollywood had previously agreed.
"This transformational merger creates a leading North American rentailer with outstanding prospects for future growth," said Joe Malugen, Movie Gallery's Chairman, President and CEO, in a statement. "With a broader geographic presence and greatly improved distribution capabilities and scale, our combined company will be a strong competitor, well-positioned for continued success in urban, suburban and rural markets."'
Movie Gallery plans to keep the Hollywood Video name on stores as well as the company's Portland headquarters.
Blockbuster officials declined to comment about the Movie Gallery-Hollywood deal. But entertainment analyst Dennis McAlpine says in a report that Blockbuster could still take a higher offer directly to Hollywood shareholders. Late last month Blockbuster officials said they were willing to launch a tender offer for the company.
But a counter-offer might not happen McAlpine says. "We doubt that will occur since we must assume that the bankers for Hollywood have talked to Blockbuster and given them a chance to top the Movie Gallery offer, an opportunity that Blockbuster apparently declined," he says in his report.
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