NEW YORK (Reuters) – Multiple bidders are expected to vie for bankrupt movie rental chain Blockbuster Inc at an auction on Monday that will decide the company’s next owner and amount of money available to pay off claims.
Once the world’s largest video chain, Blockbuster had a market cap of more than $5 billion at its peak in 2002, but came under pressure from mail-order and digital competitors such asNetflix Inc.
The auction could preserveDallas-based Blockbuster as an ongoing business, although bidders also have the option of liquidating the company, or closing it. Proceeds of the sale will become part of the bankruptcy estate.
Satellite television company Dish Network Corp and billionaire investor Carl Icahn qualified for the auction by submitting bids last week, the Wall Street Journal reported on Friday, citing people familiar with the matter.
The company decided to put itself up for sale in February after a reorganization plan fell apart.
Monday’s auction will be followed by a hearing before bankruptcy Judge Burton Liflandon April 7, to approve the new owner, who will take the company out of bankruptcy.
DIGITAL MOVIES MAY BE ATTRACTIVE
A $290 million “stalking horse” bid submitted in February by a group of hedge funds led by Monarch Alternative Capital LP had set the floor for the bidding.
Other suitors last week submitted bids of less than $296 million to qualify for the auction, the Journal said.
A Dish spokesman declined to comment. Icahn did not return calls seeking a comment.
The Monarch group also includes Owl Creek Asset Management, Stonehill Capital Management and Varde Partners.
SK Telecom, South Korea’s top mobile carrier, was also interested in investing in Blockbuster, an official of the company told Reuters last week.
SK Telecom, which controls about 50 percent of the nearly saturated South Korean market, has been looking for opportunities to invest overseas to generate new revenue.
Blockbuster has been closing hundreds of its stores and some analysts speculate that many more could be closed after any sale.
Blockbuster’s assets also include movie kiosks and a by-mail movie rental business. It also has digital delivery agreements with Hollywood studios including Sony Pictures,Twentieth Century Fox, Warner Home and Universal Studios.
Blockbuster’s online content might be one of the attractions for Dish Network Chief Executive Charlie Ergen, who could use it to build a so-called “over-the-top,” or online product for delivering movies, said Marci Ryvicker, a Wells Fargo analyst.
“It is probably a good way to acquire a massive amount of content,” Ryvicker said.
Activist investor Icahn, a large holder of Blockbuster senior debt, has long been interested in the company.
He and a group of hedge funds provided Blockbuster with a $125 million loan to operate during bankruptcy and had proposed a reorganization plan that would have put them in control of the company in exchange for their debt.
The case is in re: Blockbuster Inc, U.S. bankruptcy Court, Southern District of New York, No 10-14997.
(Reporting by Dena Aubin; additional reporting by Jon Stempel; Editing by Maureen Bavdek)
Raw Story is a progressive news site that focuses on stories often ignored in the mainstream media. While giving coverage to the big stories of the day, we also bring our readers' attention to policy, politics, legal and human rights stories that get ignored in an infotainment culture driven solely by pageviews.
Founded in 2004, Raw Story reaches 5 million unique readers per month and serves more than 19 million pageviews.