Deal Talk: Blockbuster Buy Makes Sense for DISH Network

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 |  Includes: APPCQ, DISH, LGF, MSL, NFLX
by: Alacra Pulse Check Blog

By Angus Robertson

Deal of the Day: Many have written off Blockbuster, but analysts think there might be some life in the business through DISH Network (NASDAQ:DISH), notably in strengthening streaming video competition with Netflix (NASDAQ:NFLX). DISH won Blockbuster Inc in a bankruptcy auction for about $320 million, boosting the satellite TV provider’s online features and marketing reach.

According to Reuters, DISH, the second-largest U.S. satellite TV company after DirecTV (DTV), trumped at least three other bidders, including activist investor Carl Icahn, for the one-time leader in video rentals.

ZDNet reports that Kaufman Bros analyst Todd Mitchell believes “DISH could launch an on demand movie service that would 1) significantly enhance the competitive offering of the DISH Network, and 2) compete on a standalone basis with Netflix and other over-the-top video services.”

Wells Fargo analyst Marci Ryvicker agrees: “We think that Blockbuster could be the way that Charlie Ergen gets content for a potential over-the-top [broadband] product — one that could end up competing with Netflix down the line.” Ryvicker said buying Blockbuster could also help Dish’s VOD service, according to The Hollywood Reporter.

“We actually like the idea” of DISH buying Blockbuster, said Collins Stewart analyst Tom Eagan. He says DISH could use Blockbuster to offer free DVDs and online-video streaming for DISH’s satellite-TV subscribers. Eagan echoes what others have suggested: DISH creating a service like Netflix, the WSJ Deal Journal reports.

Zacks believes “DISH Network will definitely benefit if it can acquire Blockbuster…. acquisition of Blockbuster will provide DISH Network adequate bargaining power with movie studios.

Zacks maintained its long-term Neutral recommendation on DISH Network. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock. Netflix, however, is not standing still: Lions Gate Entertainment Corp (NYSE:LGF), which produces the hit television series “Mad Men,” struck a deal with Netflix to stream all seven seasons of the critically acclaimed show about a 1960s advertising agency, the WSJ reports.

Other Deal Activity:

Private equity firm Kohlberg Kravis Roberts & Co LP and the founder of Taiwan’s Yageo Corp plan to buy the components maker in a $1.6 billion deal, sending its shares up by the maximum allowed in a day, Reuters reports.

KKR and Yageo founder and chairman, Pierre Chen, will form a company to bid for all the shares of Yageo, a maker of electronic components including resistors and capacitors, they said in a statement on Wednesday.

American Apparel (APP) is working with advisor Rothschild to help it explore a potential sale, as the company contends with a falling stock price and the threat of bankruptcy, three sources familiar with the matter told peHUB.

MidSouth Bancorp (NYSE:MSL), a Louisiana banking firm, is expanding in the Dallas-Fort Worth market with plans to acquire all five branches of Dallas-based Jefferson Bank, the Dallas Business Journal reports. Meanwhile, First Bank & Trust is looking to buy Jefferson Bank, according to a report by the American Banker.