Movie Gallery Inc. said it formally launched a tender offer for the stock of Canadian rival VHQ Entertainment Inc. on March 11, about a week after the companies agreed to a friendly $14.1 million merg

NEW YORK (AP) -- Movie Gallery Inc. said it formally launched a tender offer for the stock of Canadian rival VHQ Entertainment Inc. on March 11, about a week after the companies agreed to a friendly $14.1 million merger.

Dothan, Ala.-based Movie Gallery, the country's third-largest rental chain, is offering shareholders $1.15 Canadian for each VHQ share. The deal is a 53% premium to VHQ's 60-day weighted average trading price through March 1 on the Toronto Stock Exchange.

The acquisition is pending regulatory approval and is conditional on at least two-thirds of VHQ's shares being exchanged.

VHQ shareholders have until April 18 to accept the offer, which has been approved and unanimously recommended by VHQ's directors, Movie Gallery said.

Movie Gallery has said that the transaction is expected to add to its cash flow and earnings within the first year. The total consideration for VHQ is $20.4 million Canadian -- $16.9 million at current rates -- including the assumption of debt amounting to $2.9 million Canadian.

The company's purchase of VHQ pales in comparison to a planned $900 million takeover of Hollywood Entertainment Corp., the No. 2 U.S. rental chain. No. 1 Blockbuster Inc. has offered nearly $1 billion for Hollywood in an effort to block that combination.

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