Bankrupt Blockbuster Inc. has agreed to be sold for $290 million
to a group of investors in a deal that requires 609 of its video
rental stores to begin liquidating by the end of the month.
Stephanie Hoops
Bankrupt Blockbuster Inc. has agreed to be sold for $290 million to a group of investors in a deal that requires 609 of its video rental stores to begin liquidating by the end of the month.
It was not known Tuesday if the Blockbuster in Hollister is slated for closure, but the purchase agreement refers to the 609 as “initial liquidation stores,” suggesting there will be more.
Dallas-based Blockbuster kept its comments to those contained in a news release.
The purchasing company is Cobalt Video Holdco LLC, which was formed by four hedge funds (Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Varde Partners Inc.) that have been steering Blockbuster’s Chapter 11 bankruptcy and now have the option to convert it to a Chapter 7 liquidation. They all hold secured Blockbuster debt, so they stand to benefit if someone else buys the company for more than what they paid for the debt.
Cobalt made a stalking-horse bid, which is an initial bid on a bankrupt company’s assets that effectively sets the bar so other bidders can’t lowball the purchase price. The terms of the deal provide that Cobalt will take all of Blockbuster’s U.S. assets and those of its international subsidiaries for $290 million, subject to adjustment.
If the deal hasn’t closed by April 20, the parties are free to terminate it, according to the purchase agreement.
Blockbuster has asked the bankruptcy court to authorize an auction to seek other bids. Any deal must be approved by the court.
Blockbuster’s first store opened in 1985 and it eventually became the first national retail chain provider of in-home video entertainment. In the early years, the company’s retail business was a mix of corporate and franchisee-owned stores, and it eventually expanded into mail, digital and vending distribution.
In 1994 Viacom Inc. merged with Viacom in an $8.4 billion deal. An analyst interviewed by the New York Times immediately after the merger questioned whether it was wise for Viacom to spend that kind of money on a business that could become obsolete “as consumers may one day be able to order movies through interactive links via cable television in their home.”
The companies split up in 2004, and Viacom took a $1.3 billion write down.
In recent years, competition from Netflix, Redbox kiosks and video on-demand services caused Blockbuster’s revenues to decline. It filed for bankruptcy Sept. 23.
