Dish Network Wins Auction for Blockbuster With $320 Million Bid
The video rental company also attracted several other suitors, including activist investor Carl Icahn, in a bidding showdown that formally started on Tuesday, but continued into the night.
NEW YORK - Charlie Ergen's Dish Network said early Wednesday that it won an auction for video rental firm Blockbuster with a bid worth about $320 million that trumped such other suitors as activist investor Carl Icahn who observers had seen as a favorite in the bidding showdown.
After certain adjustments, including adjustments for available cash and inventory, satellite TV provider Dish said it expects to pay approximately $228 million in cash. The closing is expected to occur in the second quarter.
Blockbuster will use some of the proceeds from its sale to repay some of the money it owes Hollywood studios. How much couldn't immediately be determined.
The winning bid from former professional poker player Ergen came in the early Wednesday morning hours after an all-day Tuesday auction process that dragged on with three remaining bidders - a group led by Icahn, Dish and a group of financial firms. A spokesman said the auction ended around 1:30am ET.
While Icahn, a long-time Blockbuster investor and, more recently, debtholder, was seen as a favorite in the bidding marathon, Dish's interest in a serious play for Blockbuster was apparent early Tuesday when its original offer was named the lead bid at $284 million as the auction started.
The final price tag for Blockbuster compares with the $315 million that AOL recently agreed to spend on buying the Huffington Post.
The deal is Ergen's latest acquisition outside of Dish's traditional pay TV services, which he has said faces a range of challenges, including online video providers such as Netflix. He recently also areed to acquire a satellite broadband provider for about $1 billion. Analysts have said they would like Ergen to lay out his new vision for the company.
Dish signaled it would continue to operate Blockbuster stores, even though it didn't detail how many, and leverage both them, including to market Dish's services, and the company's brand.
"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," said Tom Cullen, executive vp of sales, marketing and programming for Dish. "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."
One possible service extension for Dish is the launch of a broadband video service. "Blockbuster could be the way that Charlie Ergen gets content for a potential over-the-top [broadband] product -- one that could end up competing with Netflix down the line," Wells Fargo analyst Marci Ryvicker said in a report last week.
Icahn had partnered with liquidators in a sign that he was planning to close more Blockbuster stores than some of the other bidders.
South Korean mobile phone operator SK Telecom and a separate group from liquidators also had submitted early bids for Blockbuster.