Blockbuster Part II: Private Equity Strikes Back

Private equity outfit Gordon Brothers Europe is set to buy the remaining 264 Blockbuster stores, seemingly not convinced that the collapsed retailer is on its last legs...

by Michael Northcott
Last Updated: 19 Aug 2013

It really did look as though Blockbuster’s tape had been chewed, but the scraps of the entertainment retailer that have not already been shut down have been purchased by Gordon Brothers Europe for an undisclosed sum.

The private equity house has acquired 264 Blockbuster locations across the UK and Channel Islands, and it says that it will continue to operate them – ‘business as usual’ – as Blockbuster stores. Sceptics like us at MT would ask why PE thinks the chain can survive when the balance sheet suggests it had more staff than customers, but what do we know?

Still, Frank Morton, the chief exec of Gordon Brothers Europe, said: ‘We know that we have a challenge ahead but there is still a market to be served. Blockbuster has a strong brand affinity and we believe that with the right mix of new product offering, new technologies, strategic management and marketing, we can bring new life to this high street staple.’ To be fair, it wouldn’t be the first time that some serious fat-trimming and changed leadership breathed new life into a company.

Distressed assets bought for a song is Gordon Brothers' stock-in-trade, so we can be pretty sure this looks like a bargain to them. Furthermore, it is rent-day today for retailers everywhere, so Blockbuster has been saved in the nick of time. Others may not be so lucky.

Still, if the ‘undisclosed sum’ is anything like the £1 prices that occasionally come up on debt-riddled companies, then this is a nice little portfolio of high street premises, bought for very little. Furthermore, Blockbuster still has 2.9 million active members, so there is a chance that some juice can be squeezed out of a leaner operation.

The good news is that, at least in the short term, the purchase will save 2,000 jobs, and a new boss, former HMV commercial director Gary Warren, has been appointed as MD. Given that HMV collapsed around the same time and for similar reasons to Blockbuster though, Warren is arguably jumping out of the frying pan and into the fire. Still we, wish him the best of luck.

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