Hollywood Entertainment Corp. says a management-led buyout group will acquire the company for about $890 million, taking the No. 2 U.S. video-rental chain private even as its top competitor prepares f

Hollywood Entertainment Corp. says a management-led buyout group will acquire the company for about $890 million, taking the No. 2 U.S. video-rental chain private even as its top competitor prepares for greater market exposure.

Under the deal, a group led by Hollywood chairman/CEO Mark Wattles and private investment firm Leonard Green & Partners will pay $14 in cash for each Hollywood share.

That represents a nearly 31% increase to the Portland, Ore.-based company's closing stock price of $10.70 Friday (March 26) on Nasdaq. Hollywood Entertainment shares on March 24 touched a two-year low of $10.50.

Wattles, who is also Hollywood's founder, will own about half of the company after the deal is closed.

The buyout comes as Viacom Inc. seeks to split off its majority stake in Blockbuster Inc., the No. 1 U.S. video-store chain, to shareholders after several failed attempts to sell the growth-strapped retailer.

Video-store chains have come under increasing pressure in recent years from larger retailers like Best Buy and new subscription services like Netflix.

Hollywood, which owns more than 1,900 video stores and about 600 Game Crazy video-game specialty stores, posted a sharp drop in adjusted net income fall in its most recent quarter, in part because rental revenue growth continued to sputter.

--Reuters