Dish Network acquires bankrupt Blockbuster for $320.6M

Satellite television services provider Dish Network won a bankruptcy auction for video rental chain Blockbuster, offering about $320.6 million to beat out rival bidders including South Korean wireless operator giant SK Telecom. The Wall Street Journal reports the marathon auction began Tuesday morning and closed around 1:35 am ET Wednesday--Dish began the auction with a bid of $284 million, with SK Telecom countering with an offer of $284.5 million, stating it had reached deals with three of Blockbuster's movie studio/DVD partners that would add $50 million in creditor value and keep the chain going as a business. Bidders also included corporate raider Carl Icahn (a Blockbuster shareholder) and a group of hedge funds led by Monarch Alternative Capital.

Dish has indicated interest in using Blockbuster's retail locations as a channel to sell subscriptions to its satellite TV services, sources say, adding the company is also looking at potential synergies with Blockbuster's video-on-demand initiatives.

Blockbuster's creditors will see about $178.8 million of Dish's bid, the WSJ notes--the balance will pay off expenses associated with the auction and the company's bankruptcy proceedings. The Blockbuster chain, which includes 2,500 retail outlets, filed for bankruptcy in September 2010 after failing to keep pace with rivals like Netflix. Its existing mobile video solutions include Blockbuster On Demand, introduced by Verizon Wireless (NYSE:VZ) in mid-2010 in conjunction with the launch of the Droid X smartphone.

Dish's Blockbuster win follows two months after the satellite provider acquired bankrupt mobile satellite services company DBSD North America for about $1 billion. A subsidiary of ICO Global Communications, DBSD--formerly known as ICO North America--had been in bankruptcy protection since May 2009; in April 2008, the firm launched its ICO G1 satellite, touting interactive mobile video and navigation and emergency assistance solutions under the ICO mim brand. Content partners included NBC Universal, MTV Networks, Turner Broadcasting System and Discovery Networks.

News of SK Telecom's interest in Blockbuster first surfaced late last month. The Financial Times reported SK Telecom looked at Blockbuster as an opportunity to expand its business abroad and build up its content development initiatives, a strategy intended to compensate for stagnant revenue growth in its home market. Investors expressed surprise over the possibility of the SK Telecom/Blockbuster deal: "We are slightly perplexed because no immediate synergies come to mind and the required restructuring of the company could be very costly," said CLSA analyst David Lee in a report. "A consummated Blockbuster deal would be quite negative due to the large size of the company and its declining business."

For more:
- read this Wall Street Journal article

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