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Published: 4/6/2011 - Updated: 3 years ago

Court to weigh 3 bidders in deciding fate of Blockbuster

BLADE NEWS SERVICES
The video-rental chain that includes this store in Palo Alto, Calif., once dominated the U.S. movie-rental business. It plans to close about 700 of its remaining 2,400 stores. The video-rental chain that includes this store in Palo Alto, Calif., once dominated the U.S. movie-rental business. It plans to close about 700 of its remaining 2,400 stores.
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NEW YORK -- Billionaire investor Carl Icahn, Dish Network Corp., and a group of debt holders were the three remaining bidders for movie-rental chain Blockbuster Inc. Tuesday at U.S. Bankruptcy Court in New York.

The bankruptcy auction will decide the fate of the Dallas movie-rental chain and could decide whether it will survive at all. The bidding continued last evening, and it was not clear when it would finish.

After several rounds of bidding, the last bid by the group of debt holders called Cobalt Video Holdco, of $308.1 million, was deemed the best when the courthouse closed for the day. The auction was continuing at law firm Cadwalader Wickersham &Taft, where the proceeding was closed to the public.

Dish Network at one point bid $307.1 million for Blockbuster's movie rental business, bettering a $304.6 million bid from Mr. Icahn and a group of liquidators. SK Telecom Co., which had bid $284.5 million, dropped out after two rounds. An expected joint bid by two liquidation firms, Gordon Brothers Group and Hilco Merchant Resources, did not materialize.

Although the early bidding took place in open court, the process was hardly action-packed. Lawyers, bidders, and others took extended breaks over the day to revise their bids and negotiate. Mr. Icahn himself made an appearance in court.

The successful buyer or buyers could continue to operate the chain in full or part or liquidate the company, pressing "stop" on the stores that brought movie night to millions of families.

Blockbuster is a shadow of its former self. When Blockbuster, based in Dallas, filed for bankruptcy protection, it was down to 3,000 stores, less than a third of the peak of 9,100 in 2004. There are about 2,400 currently open with plans to close about 700 more by mid-April. Blockbuster once dominated the U.S. movie rental business. But it lost money for years as that business declined because customers shifted to Netflix Inc., video on demand, and DVD rental kiosks.

Mr. Icahn was part of the group of debt holders that provided Blockbuster financing to operate while in bankruptcy in September. Everyone in the group except Mr. Icahn made the initial "stalking horse" bid in February to buy Blockbuster for $290 million.

The auction is expected to be completed before a sale approval hearing scheduled for Thursday.



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