The satellite TV company acquires Blockbuster’s assets for $320 million.
Mark Brohan , Research Director
After two days of back and forth bidding Blockbuster Inc. has a new owner.
The assets of Blockbuster.com, No. 34 in the Internet Retailer Top 500, were acquired Tuesday by satellite television company Dish Network Corp. for $320 million.
Dish, one of several bidders for the assets of Blockbuster, will pay $228 million in cash to acquire the assets and another $92 million for other investor- and creditor-related issues. "With its more than 1,700 store locations, a highly recognizable brand and multiple methods of delivery, Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for Dish Network," says executive vice president of sales, marketing and programming Tom Cullen.
As part of the winning bid, Dish Network also acquires Blockbuster.com, which generates annual revenue of more than $200 million, and the chain retailer’s emerging digital entertainment and content streaming business. "While Blockbuster's business faces significant challenges, we look forward to working with its employees to re-establish Blockbuster's brand as a leader in video entertainment,” says Cullen.
The sale of Blockbuster’s assets are still subject to approval by the U.S. Bankruptcy Court for the Southern District of New York, but Cullen says Dish Network expects to close the deal by the end of the second quarter.
Many of the details, such as how Dish Network intends to use Blockbuster’s e-commerce operation, have yet to be disclosed. But the acquisition signals that Dish Network, which provides pay TV services via satellite to more than 14.2 million subscribers, sees digital entertainment as a part of its future—and a way to keep pace with increasing e-commerce competition from companies such as Netflix Inc. (No. 14). “The recent growth of video content being delivered via the Internet has made alternatives to traditional pay-TV services available to customers,” Dish says in its latest annual report filed with the U.S. Securities and Exchange Commission. “This increasingly competitive environment may require us to increase subscriber acquisition and retention spending or accept lower subscriber acquisitions and higher subscriber churn.”
Blockbuster has yet to say anything publically about the sale of its assets. The bidding process began In February when Blockbuster accepted a stalking horse bid of $290 million from a consortium of current investors and note holders that includes Cobalt Video Holdco LLC, a limited liability company formed by funds managed by Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Värde Partners Inc.
A stalking horse bid is an initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company that sets the floor for minimum acceptable bids. Blockbuster, which has already closed more than 900 stores in recent years, filed for bankruptcy in September.