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Blockbuster Puts Itself Up for Sale, Sets Opening Bid at $290M

Bankrupt video chain goes on the block after it’s unable to reach a recapitalization plan with its creditors

Home video giant Blockbuster announced Monday that it has put itself up for sale, this after the bankrupt Dallas-based company was unable to agree to a recapitalization plan with its creditors.

The company said it has submitted an auction plan to the U.S. Bankruptcy Court in New York. A

holding company made up of Blockbuster's four largest creditors, Moncarch Alternative Capital, Owl Creek Asset Management, Stonehill Capital Management and Varde Partners, has submitted an opening stalking-horse bid of $290 million.

Here's the full Blockbuster announcement:



Files Motion Seeking to Conduct Auction under Section 363Blockbuster Continuing to Serve Customers in the Ordinary Course


DALLAS, February 21, 2011 – Blockbuster Inc. (OTHER OTC: BLOKA, BLOKB), a leading global provider of rental and retail movie and game entertainment, today announced that it has initiated a process to sell the Company, which it believes represents the best means of maximizing value for Blockbuster’s stakeholders.

In conjunction with this process, Blockbuster has entered into an asset purchase agreement with a “stalking horse” bidder, 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., each of which is a secured noteholder of the Company. In addition, Blockbuster has filed a motion seeking authorization from the U.S. Bankruptcy Court for the Southern District of New York to conduct an auction process for the Company. The auction process is designed to achieve the highest and best offer for the Company’s assets and would be conducted under the Court’s supervision and in accordance with Section 363 of the U.S. Bankruptcy Code. The Cobalt agreement serves as the “stalking horse” bid in the auction, which sets the floor or minimum acceptable bid.

Blockbuster expects that its U.S. operations, including a majority of its stores, DVD vending kiosks, by-mail and digital businesses, will continue to serve customers in the ordinary course during the sale process. The Company’s international operations in Canada, Denmark, Italy, Mexico, and the United Kingdom are also expected to conduct business as usual during the sale process. Blockbuster franchise locations in both the U.S. and abroad are independently owned, operated and funded, and will also continue normal business operations.

Jim Keyes, Chairman and Chief Executive Officer, commented, “By initiating a sale process at this time, we intend to accelerate our Chapter 11 proceedings and move the Company forward. An auction will allow the Company to invite competing bids from both strategic and financial investors. This will also allow for the consolidation of ownership of the Company to those with a clear and focused vision for Blockbuster’s future.”

He continued, “The purchaser will be able to take full advantage of Blockbuster’s many strengths, which include an internationally recognized brand name, an exceptional library of more than 125,000 titles, millions of loyal customers, and a multi-channel content distribution platform. Because of its ability to deliver physical content (through DVDs) and digital content (through streaming), Blockbuster can offer customers the unique ability to access any movie, any time.”

Under terms of the Definitive Asset Purchase Agreement with respect to the transaction between the Company and the investor group (the “APA”), Cobalt has agreed to purchase substantially all of the assets of Blockbuster Inc. and its U.S. and international subsidiaries for $290 million, subject to adjustment. The APA has been filed with the Court today. The transaction is subject to the approval of the Bankruptcy Court and the satisfaction of customary closing conditions.

The bidding procedures, if approved by the Court, would require other interested parties to submit binding offers to acquire the Company within approximately 30 days following such approval. Such parties could include additional financial and/or strategic bidders. Assuming qualified bids are submitted, an auction would be held within approximately one week of the bid deadline. A final sale approval hearing is anticipated to take place shortly after the auction with the closing anticipated to occur no later than April 20, 2011.

The Company and its domestic subsidiaries filed voluntary Chapter 11 petitions on September 23, 2010. Additional information is available at www.Blockbuster.com/recapitalization or by telephone at 877-660-6684 or 732-645-4110. General information for Blockbuster customers is available at www.Blockbuster.com or by calling 1-866-692-2789.