by Don Reisinger
Blockbuster has finally found a suitor.
Dish Network announced today that it will be acquiring the movie rental chain for $228 million. The satellite provider participated in a bankruptcy court auction for Blockbuster, making a winning bid of $320 million. With adjustments for cash and inventory, the companies agreed on the final price.
After failing to see the changing times and allowing Netflix's DVD-By-Mail service to grow under its nose, Blockbuster was met by significant challenges in the rental space. In 2009, a little over a year after it tried to acquire Circuit City for $1 billion, Blockbuster was forced to close nearly 1,000 of its then 7,000 stores. The company hoped that the closures would help it return to profitability, but the efforts failed. Last year, Blockbuster was delisted from the New York Stock Exchange because of its low share price.
In September, Blockbuster was finally forced to file for Chapter 11 bankruptcy with the U.S. Bankruptcy Court. The company said at the time that it hoped to reduce its $1 billion in debt to $100 million. It offered noteholders equity in the company in exchange for relief on its outstanding debt.
Dish's winning bid for Blockbuster came less than a couple months after the rental company was courted by a "stalking horse" bidder. The rental chain said at the time that Cobalt Video Holdco offered management $290 million for its U.S. and international operations. The companies agreed to an asset-purchase agreement, which is apparently voided now that Dish has won the auction.
Though Dish didn't say what its plans are for Blockbuster, the company's executive vice president of sales, marketing and programming, Tom Cullen, was quick to acknowledge in a statement that the rental chain "faces significant challenges." Dish's overall goal, he said, is to "re-establish Blockbuster's brand as a leader in video entertainment."
Dish Network expects the Blockbuster deal to close in the second quarter, pending bankruptcy court approval.
Dish declined to comment further on the acquisition. Blockbuster has not immediately responded to request for comment.