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Published: 05 - 04 - 2005 , Late Edition - Final ,
Section C , Column 1 , Page 3 April
19, 2005 Blockbuster addresses criticism from shareholder
Blockbuster
on Monday fired back at criticism from its largest shareholder. Billionaire
Carl Icahn earlier this month accused Blockbuster of being on a "spending
spree" with shareholders' money and said he was nominating his own board of
directors that would curtail spending, pay additional dividends and limit
bonuses, according to news reports. John
Antioco, chairman and CEO of the Dallas-based video rental chain, sent a letter
to Icahn saying that abandoning Blockbuster's corporate strategy, which includes
a recent decision to end late fees and a greater investment in online services
-- "would be shortsighted and bring about a precipitous drop in our future
cash flow from which there may be no recovery." Antioco
said Icahn's characterization of Blockbuster's business investments as a
"spending spree" were wrong. Blockbuster
put its game initiative and marketing of its movie trading business on hold
until 2006, cut 2005 capital spending by more than $100 million from the
previous year and slashed corporate overhead by $70 million a year. Antioco
said shareholders received $920 million in dividends in 2004, and paying the
additional $330 million in dividends Icahn suggested would be "tantamount
to a liquidation strategy and destructive to shareholder value," Antioco
said. Antioco
also responded to Icahn's criticism of Antioco's 2004 compensation, saying
Icahn's comments were inaccurate because it referred to compensation that hasn't
been awarded or paid. "The
turmoil and uncertainty you have created threaten to distract the organization
and jeopardize our success and could prove damaging to shareholder value,"
Antioco said. Last
week, energy company Kerr-McGee headed off a proxy fight waged by Icahn and a
group that includes Jana Partners L.L.C. by buying back $4 billion of the
company's common stock. The move raised the value of Kerr-McGee stock held by
Icahn and his group by more than $70 million, according to news reports. Icahn
is known for forcing "greenmail," a tactic in which he forces a
company to make an above-market stock repurchase to quiet critics, putting
himself in a position to sell his shares and make a large profit, according to
news reports. Blockbuster
(NYSE:BBI) shares were down 2 cents to $10.06 in afternoon trading Monday.
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