Antioco checks out at B'buster
Icahn clash ends 10-year runAfter a decade at the helm, John Antioco is leaving his post as chairman and CEO of Blockbuster Inc. by year's end after a dispute over his bonus with the board of directors led by Carl Icahn.
Blockbuster didn't immediately tap a successor, with sources close to the video rental giant saying Tuesday that the deal with Antioco gives the board enough time to find someone for the top post.
According to a regulatory filing, the amended employment agreement bans Antioco from working for or investing in a competitor until Dec. 31, 2008. The announcement came about a month after news of the bonus dispute surfaced.
The arrangement is "clearly in the best interests of the stockholders," said Blockbuster leading shareholder Icahn, who tried to oust Antioco in 2005 after accumulating a big stake in the firm and criticizing his pay package. "I and the rest of the board remain committed to working with our dedicated management team to deliver on the company's financial goals for the year and to continue positioning Blockbuster for improved success now and into the future."
In Hollywood, the Antioco-led Blockbuster made waves by using its clout to cut direct revenue-sharing deals with the studios so the huge chain could bring in more copies of hot titles in a cost-efficient way.
Blockbuster shares closed down 3.5% at $6.86 on Tuesday, the worst performance on The Hollywood Reporter's Showbiz 50 stock index.
"I am pleased that we were able to reach this agreement," Antioco said. "This revised employment agreement allows for management continuity and ample opportunity for an orderly succession by the end of the year."
Under the amended and restated employment agreement, Antioco will receive a 2006 bonus of $3.05 million. Previously, the company had conditionally offered him $2.28 million. Antioco had asked for $7.65 million, which the company said Tuesday that he was entitled to under his previous employment agreement and Blockbuster's 2006 Senior Bonus Plan, "if negative discretion was not invoked."
Once he departs, Antioco will get a lump-sum payment of $4.98 million rather than the $13.5 million he would have been entitled to if terminated without cause or resigning for good reason on Dec. 31.
Wall Street observers said that Antioco's exit is a hit for Blockbuster, but they had differing takes on the longer-term stock impact.
Maintaining his "buy" rating and $9 price target on the stock, Wedbush Morgan Securities analyst Michael Pachter said Antioco is "a valuable asset (serving as CEO since 1997), and he's done the right things at Blockbuster." But he added that Icahn is "highly capable of overseeing the continued turnaround, and his active participation should be positive."
So after some initial investor worries and confusion, "ultimately the stock will increase as Blockbuster will stay the course on its restructuring, with ever-increasing focus to accelerate the pace of asset sales and debt repayment, with a more immediate return to shareholders," Pachter concluded.
Citigroup analyst Tony Wible took a slightly different stance, arguing that a management change "could be disruptive during this critical transition period for Blockbuster" and any share sales by Antioco could pressure the stock after a recent run-up. According to the analyst, Antioco owns more than 3% of Blockbuster's combined count of Class A and B shares and has various options.
As a result, Wible maintained his "hold" rating and $7 target on the stock.
What the future holds for Antioco remains unclear. At 57, the executive is not ready to retire and wants to remain in business, according to one source. Some Wall Street observers suggested he most likely would get a retail CEO position.
During his reign at Blockbuster, Antioco regularly shrugged off questions about the longer-term viability of video rental stores, deciding to prove critics wrong by regularly exploring various new business models in a trial-and-error approach.
Among successful business moves, he added video games to the company's offerings and launched Blockbuster Total Access, a key program combining in-store and online rentals in a move to combat rival Netflix. He also led the firm through a split-off from Viacom.
Among his less successful decisions were building store-in-stores for electronic equipment with RadioShack, selling satellite TV services in an arrangement with DirecTV and forging a VOD deal with energy giant Enron's broadband services group.
Antioco began his career in 1970 as a management trainee for 7-Eleven, where he stayed for 20 years and worked his way up.
In 1990, Antioco became COO of retail eyeglass chain Pearle Vision and then COO of convenience store chain Circle K Corp., where he helped the firm out of Chapter 11 bankruptcy and became chairman and CEO.
In 1996, Antioco took on the posts of president and CEO of Taco Bell. A year later, he joined Blockbuster, then owned by entertainment conglomerate Viacom, as chairman and CEO and engineered a financial turnaround, launched new marketing programs and oversaw an initial public offering in August 1999.
Until he leaves Blockbuster, Antioco said he and the rest of the executive team will remain focused "on continuing to improve the business, most notably through Blockbuster Total Access."