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Cable television broadcasting industry

Blockbuster Enters the Big Leagues with $8.4 Billion Merger Deal

Strategic Insights

— 1 min read

The merger agreement between Blockbuster Entertainment Corp. and Viacom Inc. marks a significant shift in the entertainment industry, with Blockbuster set to lose its independence in exchange for a stronger position in a rapidly evolving market. The $8.4 billion deal, which includes a $1.25 billion investment by Blockbuster in Viacom, has given Viacom the backing it needed to outbid QVC Network Inc. for Paramount Communications. The combined Viacom-Blockbuster Inc. will be led by Sumner Redstone, chairman of Viacom, and H. Wayne Huizenga, chairman of Blockbuster, who will serve as vice chairman.

Key Takeaways:

  • The merger deal is worth $8.4 billion, with Blockbuster investing $1.25 billion in Viacom as part of the agreement.
  • Blockbuster's revenue is expected to reach close to $3 billion this year, making it one of the nation's fastest-growing companies.
  • The deal will give Viacom a significant presence in the home video market, with over 3,500 home video stores across the Blockbuster system.
  • H. Wayne Huizenga, chairman of Blockbuster, will receive a 9.2 percent stake in the merged company and maintain his role as vice chairman.
  • The new Viacom-Blockbuster board will consist of six Viacom directors, three from Blockbuster, two from Nynex, and one independent director.
  • Blockbuster has been on a buying spree in recent years, acquiring Spelling Entertainment Group Inc., Republic Pictures Corp., Music Plus, and Sound Warehouse, as well as forming a partnership with Virgin Group for a chain of record "megastores."

Statistics:

  • The merger deal is worth $8.4 billion.
  • Blockbuster's revenue is expected to reach close to $3 billion this year.
  • Blockbuster has over 3,500 home video stores across the Blockbuster system.
  • The new Viacom-Blockbuster board will consist of 10 directors.
  • Blockbuster's recent acquisitions include:

+ Spelling Entertainment Group Inc.: acquired for nearly $165 million.

+ Republic Pictures Corp.: acquired for $25 million.

+ Music Plus and Sound Warehouse: acquired for $125 million.

+ Partnership with Virgin Group: a $150 million deal for a chain of record "megastores."

Sources:

  • "Blockbuster to Merge with Viacom in $8.4-Billion Deal," The New York Times, Oct. 11, 1994.
  • "Viacom Wins Paramount Bid After Blockbuster Funding," The Wall Street Journal, Oct. 12, 1994.
  • "Blockbuster's Huizenga to Receive 9.2% Stake in Viacom," Los Angeles Times, Oct. 11, 1994.

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