Reaction to Blockbuster's (BBI) dropped bid: Movie Gallery (MOVI) jumps 21%

Investors enthusiastically approved Blockbuster's (ticker: BBI) decision to end its pursuit of Hollywood Entertainment (ticker: HLYW) by buying shares of Movie Gallery (ticker: MOVI).  MOVI shares gained 21%, while BBI and HLYW fell.  Netflix (ticker: NFLX) gained 8% on the news.

• MOVI shares gained 21% as the likelihood of a MOVI / HLYW merger became even more realistic, thus creating the second largest rentailer in the U.S.  The combined entity will own about 4,000 stores compared to Blockbuster's 5,500 stores.  MOVI has already received regulatory clearance for the merger.
• BBI shares fell 7% as it abandoned its chance to swallow its largest rival and at the threat of a strong #2 player in the video rental space.
• HLYW shares fell 7% to $13.20, essentially in-line with the $13.25 acquisition price
• NFLX gained 8% as it benefits from any weakness at BBI