Blockbuster Entertainment Co. has come under fire over its commanding stake in Spelling Entertainment.

The Fort Lauderdale, Fla.-based video-rental and music chain was hit by a suit from minority Spelling shareholders Wednesday alleging that they are being unfairly treated by Blockbuster, which owns 63.5% of the production company.

The suit, filed in Florida state Circuit Court in Broward County, argues that Blockbuster has denied Spelling shareholders the true value of their stock by buying a stake in the company vs. a single tender offer.

“We don’t comment on litigation, but this appears to be totally without merit and we’ll defend against it vigorously,” said Ron Lightstone, Spelling’s chief operating officer.

Just last month, top Blockbuster execs promised shareholders at Spelling’s annual meeting that they had no intention of taking control of the company (Daily Variety, July 14).

Meanwhile, Spelling shareholders have done well. Blockbuster initially bought a 54% stake in the company for an estimated $ 141.3 million last March, at approximately $ 5.77 a share. In June, the company acquired another 10% at around $ 6.38 a share. Soon after, the shares gained another 10% in value. Wednesday, the stock closed up .125 to a new 52-week high of $ 7.75.

Separately, Blockbuster said it will redeem its Liquid Yield Option Notes due 2004 on Sept. 3. Each LYON can be redeemed for $ 416.72. Prior to redemption, holders may convert each LYON into 27.702 common shares, valued at around $ 679.

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