Court asked to bar acquisition
WASHINGTON — Charging that Blockbuster has failed to provide regulators with required information, the Federal Trade Commission asked a federal court on Friday to bar the nation’s top vidtailer’s proposed acquisition of Hollywood Entertainment.
Blockbuster denied the charges, claiming it had indeed provided the information, and then vowed to continue with the acquisition of the No. 2 vidtailer.
Dispute, which revolves around conflicting claims of when the agency actually received the info, throws into question whether Blockbuster will be able to go ahead with its March 11 tender offer for Hollywood’s shares.
Blockbuster gave regulators its proposal for merger along with relevant information in late December. Under federal laws on proposed mergers, the FTC has 30 days to review submitted materials. If the agency raises no objections in that time period, the merger can proceed.
More data sought
However, on Jan. 12, the agency told Blockbuster it needed to supply more info about store pricing.
Blockbuster claims it fulfilled that request in early February, thus triggering the start of the 30-day period. But before the end of the month, the FTC notified the vidtailer that as many as 60,000 of 120,000 data points it had supplied were inaccurate.
“It’s only within the last three to five days that Blockbuster finally gave us everything we need,” an FTC official told Daily Variety. “The 30-day period has only just begun.”
But Blockbuster has continued to maintain that the 30-day period began early last month and is thus scheduled to expire this week, when the vidtailer plans to move ahead with its hostile bid for Hollywood — hence, the FTC’s request to a U.S. District Court on Friday to block Blockbuster’s plans.
‘We corrected it’
“What have they been doing with the data for the past several weeks?” Blockbuster exec VP and general counsel Ed Stead said. “We gave them one file that turned out to be corrupted. They had it for several weeks before they told us about it. Once they did we corrected it.”
The FTC official responded that Blockbuster is being uniquely uncooperative. “Often this process works very well. This is only the third time we’ve brought an action like this in the last 28 years.”
According to Stead, it’s the FTC that needs to get with the program.
“They’re struggling with how to analyze this merger because they’re floundering in all this historical data,” he said. “When they looked at this same merger five years ago, they were against it, and it’s a lot of the same staff people working on it this time. But the world has changed in five years. We’ve moved on and are competing in a dynamic, changing market. It’s time for the FTC to catch up with the market.”
Hearing on injunction
A hearing has been skedded for Thursday on the FTC’s request for a preliminary injunction against Blockbuster.
Movie Gallery, another leading vidtailer, has put together a friendly deal for a merger with Hollywood, which is awaiting approval from the Securities and Exchange Commission. “It is possible that the FTC hopes to prolong this … process long enough so that Movie Gallery might complete its offer for Hollywood and therefore make moot the need for the FTC to decide one way or the other on the antitrust status of a Blockbuster/Hollywood combination,” said retail analyst Dennis McAlpine.
Shares of Hollywood shot up on heavy volume immediately following the announcement that the FTC had filed a motion with the court, reaching heights they hadn’t seen since Blockbuster first unveiled its $14.50 a share hostile bid for the company. The stock closed up 2.18% at $14.06.
Shares of Blockbuster dipped on the news, closing down 0.91% at $8.67, while Movie Gallery’s rose, closing up 2% Friday at $23.46.
Before the FTC’s action, many analysts were expecting a resumption of the bidding war for Hollywood this week.