Blockbuster Eyes Hollywood Entertainment

The rental giant makes a $700 million offer to acquire its chief rival.
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Blockbuster

(BBI) - Get Report

on Thursday has made a bid to buy its chief rival,

Hollywood Entertainment

(HLYW)

, a move that would extend its position as the largest movie rental chain.

The company said it has expressed an interest in acquiring Hollywood for $700 million, or $11.50 a share, a 17% premium over Hollywood's closing price of $9.80 on Wednesday.

"We believe this proposed transaction better positions Blockbuster to compete in the rapidly changing home entertainment marketplace, while simultaneously benefiting consumers as well as Blockbuster and Hollywood Entertainment shareholders," John Antioco, Blockbuster's chairman and chief executive, said in a statement.

Blockbuster said that a dialogue has begun on a deal, but that there has yet to be any substantive discussion on specific terms. However, any agreement would likely entail Blockbuster assuming about $300 million of Hollywood's outstanding debt.

Hollywood Entertainment has more than 1,920 Hollywood Video stores and 600 Game Crazy specialty stores, while Blockbuster has about 9,000 stores worldwide.