Portland, OR-based Hollywood already is holding an agreement tobe acquired by the private equity firm, Leonard Green &Partners, for $10.25 per share. That transaction originally wasproposed in March at $14 per share, but Leonard Green lowered itsbid last month because of "amended commitments" from its debtfinancing sources. Hollywood's stock closed yesterday at $9.80.

The deal would position locally based Blockbuster "to compete inthe rapidly changing home entertainment marketplace," John Antioco,the company's chairman and CEO, says in a statement. The companyhas faced increasing competition from discounters and online rentalfirms such as Netflix, industry observers say.

If Blockbuster is able to acquire Hollywood, it would increaseits share of the rental business from 40% to 50%, Dennis McAlpine,managing partner of Scarsdale, NY-based entertainment research firmMcAlpine Associates, tells GlobeSt.com. "It would give them asubstantially higher customer base," he says.