Blockbuster CEO Goes After Icahn in Letter
Blockbuster Inc. Chief Executive John Antioco lashed out Monday at the company’s biggest shareholder, Carl Icahn, accusing the New York financier of creating “turmoil and uncertainty” through criticisms that he said would jeopardize the company.
In a letter Antioco further raises the already growing tensions between Blockbuster and Icahn, who owns 9.7% of the nation’s largest video rental chain.
The longtime corporate raider has vowed to run three of his own candidates for Blockbuster’s board in advance of Dallas-based Blockbuster’s May 11 annual meeting. Icahn could not be reached for comment.
In his letter, Antioco defended his business strategy of increasing the investment in Blockbuster’s online rental service and dropping customer late fees as “essential to confront the significant challenges facing our industry.” He also criticized as financially irresponsible Icahn’s proposal that the company pay shareholders a special $330-million dividend.
“We truly believe that following such a course would be tantamount to a liquidation strategy and destructive to shareholder value,” Antioco said.
In an April 7 letter, Icahn accused Antioco of going on a “spending spree.” Icahn challenged the online rental investment, which has cost $120 million this year, and the decision to end late fees, which has cost the company from $250 million to $300 million in operating income. He also has criticized Antioco’s $51-million cash-and-stock compensation package.
Blockbuster has been struggling of late. Total operating income last year was down from $459.7 million in 2003 to $256.3 million last year.
Blockbuster has been under steady pressure in the face of mounting competition from large retailers such as Wal-Mart Stores Inc., Best Buy Inc. and Target Corp. that sell DVDs at discounted prices.
In addition, Internet rental pioneer Netflix Inc. has eaten away at Blockbuster’s core movie rental business.