Movie Gallery to get new credit facility via Wachovia and Merrill for Hollywood acquisition

By Sara Rosenberg

New York, Jan. 10 - Movie Gallery Inc. plans on coming to market with a new credit facility to help fund its acquisition of Hollywood Entertainment Corp. for approximately $850 million, plus the assumption of approximately $350 million of debt, according to a market source.

Wachovia and Merrill Lynch are the lead banks on the deal, with Wachovia left lead, the source added. The two banks have already committed to provide the financing necessary for the acquisition.

Under the definitive merger agreement, Movie Gallery will acquire all of the outstanding shares of Hollywood for $13.25 per share in cash.

The transaction, which is subject to Hollywood shareholder approval, customary regulatory approvals and financing, is expected to be completed during the second quarter of 2005.

Movie Gallery's board of directors has already unanimously approved the transaction.

Hollywood's entry into the merger agreement with Movie Gallery occurred at the conclusion of an auction process led by a special committee of its board of directors during which various bids were solicited.

The amended merger agreement with Leonard Green & Partners LP's Carso Holdings Corp. entered into on Oct. 13, 2004 under which Carso would have paid $10.25 per share in cash has been terminated.

Movie Gallery is a Dothan, Ala.-based owner and operator of video specialty stores. Hollywood is a Wilsonville, Ore.-based video chain - and will remain in Wilsonville following the acquisition.

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