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CARL ICAHN ELECTED TO EMBATTLED BLOCKBUSTER BOARD

Current CEO Voted off; Two Icahn Supporters Voted on

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LOS ANGELES (AdAge.com) -- Carl Icahn, the renowned corporate raider and largest single shareholder in Blockbuster, was elected to the video rental chain’s board of directors yesterday, according to preliminary vote counts.
Photo: AP
Carl Icahn is flexing his muscle as Blockbuster's largest single shareholder.
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Though it will be several days before the results are finalized, it appears that Mr. Icahn’s two nominees –- entertainment industry veterans Strauss Zelnick and Edward Bleier –- also were elected to the board.

Fierce battle
Mr. Icahn has been waging a fierce and public battle recently against Blockbuster’s CEO, John Antioco, criticizing everything from his million-dollar bonuses to his overall strategy for the ailing company.

Yesterday’s vote knocked Mr. Antioco off the board, along with incumbent board members Linda Griego and Peter Bassi. Mr. Antioco remains CEO, and board members, during the same meeting, said they will convene again in order to place Mr. Antioco back on the board as chairman.

Mr. Antioco had threatened to leave the company if he were to be voted off the board.

Mr. Icahn, who did not attend the stockholder meeting, said he favors keeping Mr. Antioco in the company, if only to avoid paying his generous severance package. A representative for Mr. Icahn said during the meeting that Mr. Icahn supports re-appointing Mr. Antioco to the board.

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

That strategy has been under fire of late. Mr. Icahn, whose previous corporate targets have included TWA, USX and Texaco in the 1980s, has criticized Blockbuster’s online service, which has been in a price war with Netflix and cost $200 million to launch last year. So far, it has about 1 million customers, expecting to double that by early next year. Netflix counts more than 3 million subscribers.

Also under fire: Blockbuster’s “end of late fees” ad campaign that launched at the beginning of the year. The chain expects to lose hundreds of millions of dollars by not collecting the fees it once did from customers who are late returning DVDs and video games. The chain also will have to pay some $600,000 to settle claims by 47 states that the ad campaign was misleading.

'Spending spree'
Mr. Icahn has said Blockbuster's management has been on a “spending spree” and demanded that the company pay higher dividends to shareholders.

In a filing last month with the Securities and Exchange Commission, Mr. Icahn said, “I am determined to put into nomination a slate, which if elected will attempt to bring discipline to the spending spree currently in effect, control any further egregious bonuses, strongly urge the board to give greater dividends to the shareholders and be sure that any offers for the company see the light of day.”

Mr. Icahn has complained about Blockbuster’s failed attempt to take over its biggest rival, Hollywood Entertainment’s Hollywood Video. Blockbuster executives said they dropped the bid for Hollywood Video because of regulatory concerns. Smaller competitor Movie Gallery now plans to buy Hollywood Video.

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