Shares of Hollywood Entertainment were flying higher Oct. 14 after the nation's second-largest video rental firm said it has agreed to a lower price tag for a buyout by California-based investment fir
New York (The Hollywood Reporter) -- Shares of Hollywood Entertainment were flying higher Oct. 14 after the nation's second-largest video rental firm said it has agreed to a lower price tag for a buyout by California-based investment firm Leonard Green & Partners.
The firm is now set to pay $10.25 per share, or $622.8 million, about 30% less than the $14 a share negotiated earlier this year, after it said in August that weak video rental industry conditions have made the financing of the deal a challenge.
However, the terms would still represent a premium to Hollywood Entertainment's current share price.
As part of the revised deal terms, Hollywood Entertainment founder, chairman and CEO Mark Wattles -- who is set to remain in his position -- will now contribute all of his equity in the company in exchange for a stake in the new entity.
With the announcement, Leonard Green seems to have clinched the transaction and gained a major pricing concession, which earned a fairness opinion from investment bank Lazard. The company said it expects to close the transaction in January.
However, Hollywood Entertainment also gained some advantages in the new agreement, as it won't have to pay a breakup fee if the transaction doesn't get completed. In addition, it said in a statement that under the new terms, Hollywood Entertainment is "entitled to solicit competing proposals."
Industry observers said Thursday that the revised deal terms once again highlighted the video rental sector's current challenges. Most sector stocks have been under pressure because of tough competition from big retailers and new technologies that have left the core rental business flat to down for the past year or so.
Leonard Green is the largest private equity firm in Southern California and manages more than $3.6 billion of private equity capital. It specializes in management buyouts and going-private deals.
Kathleen Anderson contributed to this report.