Icahn Wins Seat at Video Giant

Billionaire investor Carl Icahn and two other dissidents easily won election Wednesday to the board of ailing video rental giant Blockbuster Inc., replacing Chief Executive John Antioco and two other directors.

But, in a conciliatory move, Antioco was likely to be reappointed later this week to the board of the Dallas-based company, with Icahn’s blessing.

Under a plan being discussed, Antioco would remain chairman and continue serving as CEO. One reason: Blockbuster could be on the hook for about $54 million in severance if Antioco leaves the company altogether, which he threatened to do if he lost Wednesday’s vote.

Icahn’s victory during Blockbuster’s annual meeting in Dallas is the latest upheaval for a company that has stumbled badly, even as it remained by far the nation’s dominant video store chain.

Blockbuster has been under siege by mass merchandisers such as Wal-Mart Stores Inc. that sell low-priced DVDs, while online rental firms such as Netflix Inc. have eaten away at its market.

Icahn’s steady drumbeat of criticism over what he argued were Antioco miscues and excessive bonuses resonated with shareholders.

Preliminary results showed 77% of the votes cast going to Icahn and his two candidates, former music executive Strauss Zelnick and Edward Bleier, a former top Warner Bros. executive.

The veteran corporate raider savored the victory. In a statement, Icahn said he was “elated by this grand victory for corporate governance.”

He also extended an olive branch to Antioco, with whom he had engaged in a bruising public feud over the company’s future.

“My nominees and I are looking forward to working hand in hand with the rest of the board and Mr. Antioco,” Icahn said.

But in an interview with CNBC, Icahn suggested the decision to invite the executive back on the board had more to do with avoiding paying a “golden parachute” to Antioco.

“The board was able to cure the default, so to speak,” said Icahn, who did not return calls seeking comment.

Icahn’s three positions won’t control the board, which has seven seats -- eight if Antioco is invited back. But Icahn’s victory is expected to give him considerable clout. Final voting results won’t be available for several days, but Blockbuster all but conceded defeat.

In a news release, Antioco was circumspect about his plans. The former Taco Bell executive was hired as Blockbuster chief in 1997.

“Blockbuster is a world-class brand that I believe has great potential for future success,” Antioco said. “I continue to believe in the business strategy we have been implementing.”

Antioco did not confirm whether he would accept reappointment to the board, but all indications were that he would. Also losing their seats in the vote were restaurant executive Peter Bassi and Los Angeles businesswoman Linda Griego.

Wall Street sent Blockbuster shares up 21 cents to $10.05 on the New York Stock Exchange.

Some analysts welcomed Icahn’s victory.

“I think with three new directors you will have more oversight to be more disciplined with their spending,” said Lehman Bros. analyst Anthony DiClemente. “It’s sort of a nice combination. These guys will come in and make sure there is a chaperone but still have the guy who built the company.”

Icahn and Blockbuster board members spent late Tuesday night and early Wednesday attempting to forge a compromise.

But the attempt came too late. By early Wednesday, it was clear Icahn’s slate won.

However, it appeared Icahn himself did not receive more than 50% of the vote even though he won, which Antioco saw as positive, said Michael Pachter, analyst with Wedbush Morgan.

“Antioco viewed that as ... not as big a lack of confidence as he thought,” said Pachter.

Momentum against Antioco swung sharply after Blockbuster pulled the plug on a bid to buy leading competitor Hollywood Entertainment Corp. Icahn has accused Blockbuster of turning away from a deal with the Federal Trade Commission.

According to Mark Wattles, former chief executive of Hollywood Entertainment, Blockbuster failed to pursue a compromise on the number of stores it would have to shed to satisfy the FTC’s antitrust concerns.

“Those negotiations were never completed, and that is because Blockbuster changed their mind about pursuing the transaction at the last minute,” said Wattles, who owns 1 million shares in Blockbuster.