Pair’s fate to mate

Blockbuster, Hollywood nearing the altar

NEW YORK — It’s looking more and more like a white Christmas for Blockbuster and Hollywood Video –as in nuptials, arranged or not.

Blockbuster shares shot up in trading Thursday after Hollywood chairman-CEO Mark Wattles said his hopes of engineering a private buyout are fast fading, meaning Blockbuster could well emerge as the winning suitor in the auction of Hollywood.

Comment came less than 48 hours after billionaire corporate raider Carl Icahn revealed that he has bought up enough shares to make him the single largest shareholder in both vidtailers.

Wall Street believes Icahn wants to force the sale of Hollywood to rival Blockbuster.

Wattles told Dow Jones Newswires that he no longer believes his agreement with Leonard Green & Partners to conduct a private buyout of Hollywood will prevail in the face of bids by Blockbuster or Movie Gallery.

Analysts attributed Blockbuster’s happy-go-lucky ride on the market Thursday to increasing certainty that it will be Blockbuster that buys Hollywood, marking a new chapter in the limping and lethargic video rental business.

Blockbuster shares were up a healthy 6.61% to close at $10.16. Hollywood Video was down 1.06% to close at $13.06.

In a filing with the Securities and Exchange Commission on Tuesday, Icahn disclosed that he has acquired about 9.9 million shares of Blockbuster, making him the largest shareholder.

The hostile takeover artist made headlines late last month when he revealed he’d accumulated an 8.4% stake in Hollywood Video. Now he’s upped his stake to 9.5%, making him the single largest shareholder in that vidtailer as well.

Icahn said in the SEC filing that Blockbuster shares are undervalued given the possibility of a merger.

Blockbuster said it appreciated “Mr. Icahn’s vote of confidence,” but offered no further comment.

Separately, Blockbuster announced this week that it will eliminate late fees beginning in the New Year — a move that takes direct aim at online movie rental service Netflix and cable video-on-demand.

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