Hollywood Entertainment Corp., doing business as video
retail chain Hollywood Video, said it signed a definitive agreement to
acquire Reel.com Inc., a video-only store
on the Internet, for approximately $100 million.
Reel.com offers more than 85,000 movie
titles, proprietary movie information, and recommendations, and rentals.
Hollywood Entertainment will issue five million shares of restricted
Hollywood Entertainment common stock and redeemable preferred stock, and
pay $30 million in cash to stockholders of Reel.com.
“This acquisition allows us to leverage Hollywood’s base of 25 million
members, industry knowledge, and studio relationships to a new and rapidly
growing distribution channel,” said Mark Wattles, chairman and CEO of
Hollywood Entertainment.
“Because of the uniqueness of an individual customer’s taste in movies, I
believe the Internet together with the PC’s information processing
capabilities is positioned to create a substantial increase in movie
consumption through matching, collaborative filtering, and customized
recommendations,” he added.
Separately, a group of Reel.com’s stockholders will purchase an additional
five million shares of restricted Hollywood Entertainment common stock at a
price per share of $13.50, a discount of the public market price to reflect
the restricted nature of the investment. The investment group will be entitled
to appoint two members to Hollywood Entertainment’s board of directors.
The new members of Hollywood’s board of directors will include Scott Beck,
former CEO of Boston Market and previously vice chairman
of Blockbuster Entertainment, and Dave Wetherell, chairman and CEO of CMG
Information Services Inc.
The investor group consists of CMG@Ventures, the strategic investment and
business development unit of CMG Information Services, Inc.; Intel Corp.; Paul
Allen’s Vulcan Ventures Inc.; and Scott Beck.
Reel.com will continue to operate with its own independent management headed
by the current CEO, Julie Wainwright.
Hollywood’s members will be directed to Reel.com’s Web site via in-store
promotions, in-store kiosks, and co-op advertising, among other traffic
building vehicles.
