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Blockbuster moves toward sale of company

The video rental specialist is planning an auction by late April to sell off its operation, with an initial "stalking horse" offer set at $290 million.

Blockbuster might soon have a new owner.

The rental company announced yesterday that it will be holding a special auction to sell off its operation to the highest bidder. The company decided to hold an auction after a "stalking horse" bidder, Cobalt Video Holdco, came along and offered management $290 million for its U.S. and international subsidies, Blockbuster said. That $290 million fee, which Blockbuster agreed to in an asset-purchase arrangement, will be used as the minimum amount that management will accept from any bidder.

However, there are several factors at play before Blockbuster can hold an auction for its sale. For one, the company is in Chapter 11 bankruptcy, for which it filed a petition in September. It now needs to receive authorization by the U.S. Bankruptcy Court for the Southern District of New York to hold an auction. Along the way, it is also trying to "accelerate" its movement through bankruptcy.

Over the past several years, Blockbuster has been slowly dying at the hands of Netflix's DVD-by-mail and streaming operation. In 2009, Blockbuster closed nearly 1,000 stores in one fell swoop. Last year, the company's stock was delisted from the New York Stock Exchange because of an exceptionally low price. The move toward bankruptcy protection in September helped the company stay afloat, but did little to help its positioning in the rental landscape.

Even so, Blockbuster CEO Jim Keyes is keeping a brave face on his company's recent past. He said in a statement accompanying Blockbuster's announcement to hold an auction that Blockbuster would be a worthwhile investment.

"The purchaser will be able to take full advantage of Blockbuster's many strengths, which include an internationally recognized brand name, an exceptional library of more than 125,000 titles, millions of loyal customers, and a multi-channel content distribution platform," Keyes said in a statement. "Because of its ability to deliver physical content (through DVDs) and digital content (through streaming), Blockbuster can offer customers the unique ability to access any movie, any time."

Blockbuster said that all binding offers must be able to close within 30 days following approval of the sale by the U.S. Bankruptcy Court. The company expects to be sold to the highest bidder by April 20 at the latest.

Meanwhile, the company's U.S. and international operations, as well as franchises, will continue to operate normally during the process.

Blockbuster declined to comment on its sale.