Friday, November 12, 2004

Hollywood drama!

After not budging for a while, Hollywood Video (HLYW) got a takeover offer from BlockBuster, of $11.50/share, higher than the buyout price that management offered earlier. Today the shares are trading at around $11.70 indicating that a rival/sweeter offer is expected from management.

This is great news, as the original lack of interest in this company really disappointed me. I for one was surprised that there weren't more bids sooner.

In general, management buyouts with no outside competing bids end up being bad for the average investor, especially if management already owns a majority stake and thus can ignore ordinary investors. The premium is usually low, and the when the company comes back to the public markets years later management would have made some neat change. Ofcourse, all this is legal but a few of these buyouts end up in court, where it still remains hard to prove that the management undervalued the company.


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