Multiple Bidders Emerge for Blockbuster in Bankruptcy Auction

Multiple bidders emerged Monday as Blockbuster’s bankruptcy auction got under way with a goal of completing a deal by Thursday, a spokesman for the chain said. With liquidators among those bidding for Blockbuster, some offers appeared aimed at shutting the stores, while preserving digital assets and a kiosk rental business that NCR operates under license with Blockbuster.

A Blockbuster spokesman declined to say how many bidders there were, but the field was said to include South Korea’s SK Telecom and Dish Network, as well as liquidators Gordon Brothers Group and Hilco Merchant Resources, who have helped shut many chains in recent years, including Circuit City. Gordon Brothers/Hilco was said to be planning to close Blockbuster’s remaining 1,717 stores and sell off inventory. Investor Carl Icahn was said to have teamed with liquidator Great American on a plan that would shut stores, but preserve the kiosk business, sources familiar with the plan said.

Dish Network’s bid is part of an effort to reposition the company as a two-way hybrid network that would combine satellite services with wireless on-demand and over-the-top content, Kaufman Brothers analyst Todd Mitchell said in a note to clients. As part of a purchase, Dish would presumably get Internet streaming rights and customer lists, he said. Those assets could be combined with recently acquired wireless spectrum to create a new service in a “cost efficient manner,” Mitchell said. “By marrying a wireless network to its satellite broadcast platform, Dish could have a propriety and ubiquitous distribution platform with a lower cost structure than DirecTV or over-the-top Internet competitors,” Mitchell said.

Bidders were scattered throughout the sixth floor of the U.S. Bankruptcy Court, New York City, with Carl Icahn’s group holed up in one room, while Cobalt Video, which entered the “stalking horse” $290 million bid for Blockbuster, was in another. Cobalt is being led by hedge fund Monarch Alternative Capital. Discussions also were conducted in the court’s hallways and Bankruptcy Judge Burton Lifland’s courtroom, which was closed to reporters.

Blockbuster had a peak market capitalization of $5 billion in 2002, but stumbled amid mounting debt incurred in being spun off from Viacom and competition from mail-order and digital streaming companies like Netflix, CinemaNow and Amazon and rental kiosk operator Coinstar’s Redbox. The negotiations were expected to continue into Monday night and resume again Tuesday, attorneys involved in the case said.