Hollywood Holders OK Buyout

Hollywood Entertainment(HLYW Quote) shareholders approved the company's acquisition by Movie Gallery(MOVI Quote) Friday, forming the second-largest video rental chain in the country.

More than 60% of the company's shareholders approved the agreement, which requires Movie Gallery to pay $13.25 cash for every Hollywood share, plus debt assumption. The entire deal will cost Movie Gallery nearly $900 million.

The merger is expected to be completed later this month.

Friday's vote ends a six-month battle for control of Portland, Ore.-based Hollywood Entertainment. While the company's board had favored Movie Gallery as a suitor, Blockbuster(BBI Quote), the country's No. 1 video chain, tried to spoil the party by announcing a hostile takeover bid for the company in November.

Blockbuster dropped its offer after it became apparent the Federal Trade Commission was unlikely to approve the deal on antitrust grounds.

Blockbuster's withdrawal angered its single-largest shareholder, Carl Icahn, who has since gone on a rampage to replace Blockbuster chief executive John Antioco. In a puzzling move, Icahn also bought a 10.84% stake in Hollywood early this month, which he said in his SEC filing was for "investment purposes." He bought the shares at $13.15.

Blockbuster's shares fell 3% to $10 today, while Hollywood shares rose less than 1% to $13.20, and Movie Gallery stock declined 0.6% to $27.87.