Icahn Buys Video Chain Stake

Billionaire financier Carl Icahn said Friday that he bought an 8.4% stake in Hollywood Entertainment Corp., the video rental chain being bid on by a group including Chief Executive Mark Wattles, by Blockbuster Inc. and by Movie Gallery Inc.

Icahn companies bought 5.11 million shares of Hollywood Entertainment from Nov. 11 to Friday and may get involved with an offer for Hollywood Entertainment, according to a filing Icahn made with the Securities and Exchange Commission.

Icahn “may seek to participate in, and influence the outcome of, any proxy solicitation and the bidding process involving” the owner of the Hollywood Video stores, the Icahn companies said in the filing.

Hollywood Entertainment is struggling to retain customers as retailers including Wal-Mart Stores Inc. sell more videos and Web-based services such as Netflix Inc. rent more films. Icahn, ranked No. 21 on Forbes magazine’s list of wealthiest Americans, built his fortune by buying shares of companies such as Trans World Airlines Inc. and influencing their strategies.

Icahn didn’t return a phone call seeking comment.

Blockbuster, the largest U.S. video store chain, made an unsolicited $700-million bid -- $11.50 a share -- Nov. 11 to buy Wilsonville, Ore.-based Hollywood Entertainment.

Blockbuster’s bid was followed by an offer this month from Dothan, Ala.-based Movie Gallery, which would create the second-largest video chain by more than doubling the number of stores it owns. Movie Gallery made an all-cash offer and didn’t disclose the amount.

Los Angeles-based buyout firm Leonard Green & Partners and Wattles offered $10.25 a share in October after failing to get financing for a $14-a-share bid.

Hollywood Entertainment shares rose 31 cents to $12.88 on Nasdaq on Friday. The shares have fallen 5.6% in the last 12 months.

Icahn is chairman of six companies, including telephone carrier XO Communications Inc. and American Real Estate Partners.

This month Icahn bid $5.38 billion for Mylan Laboratories Inc., the largest U.S. maker of generic medicines. Canonsburg, Pa.-based Mylan on Nov. 22 said the financier wasn’t serious about the offer. Icahn said in a Nov. 19 letter that he was making the bid to block the company’s proposed purchase of King Pharmaceuticals Inc., based in Bristol, Tenn.