Carl Icahn Wins Seat on Blockbuster’s Board

Billionaire Carl Icahn won a seat on Blockbuster’s board after accusing CEO John Antioco of wasting money on attempts to get customers back into video-rental stores and paying himself too much.Mr. Icahn, Blockbuster’s biggest shareholder, got enough votes at yesterday’s annual meeting to become a director, along with Icahn nominees Strauss Zelnick and Edward Bleier, said General Counsel Edward Stead. Mr. Antioco will remain chairman after a vote to expand the board by one seat, the company said.Mr. Antioco, who has run the biggest American video-rental chain since 1997, and Mr. Icahn locked horns over how to revive profit at Dallas-based Blockbuster, which lost $1.25 billion in 2004 as customers defected. The CEO scrapped late fees in January, started an Internet service, and wants to keep the company independent. Mr. Icahn wants to sell out to a private equity firm.“It’s a wing-clipping of Antioco and a resounding rejection of his strategy,” said Greg Taxin, head of Glass, Lewis and Company, a San Francisco-based proxy advisory service. “He may hold onto his job, but he is certainly going to need to perform differently.”Mr. Icahn’s lawyers said his slate of three board candidates received 77% of the vote, the New York-based investor said in a statement distributed by fax, which called the results a “landslide victory.”“There’s a lot more interest in accountability and shareholder democracy,” Mr. Icahn said in an interview after the vote. “It’s a satisfying victory.”Mr. Zelnick, a former music and film industry executive, and Mr. Bleier, who once worked for Time Warner’s Warner Brothers film studio, will replace Peter Bassi and Linda Griego on the board. Mr. Icahn backs Mr. Antioco’s plan to return to his position as chairman, Blockbuster said in a statement.For Mr. Icahn, “this is pretty rarified air,” said Patrick McGurn, a senior vice president at Institutional Shareholder Services, who said he can’t remember seeing a dissident shareholder receive so much support in a proxy contest.Rockville, Md.-based ISS, the largest proxy advisory firm, recommended on May 3 that Blockbuster shareholders reject Mr. Icahn’s candidacy.Mr. Antioco, 55, has said he would resign as CEO if he lost the chairman’s seat and that the ballot was a “referendum” on his leadership. Having Mr. Icahn on the board may trigger conflict that would hurt Blockbuster, he said two weeks ago.“I’d be lying if I told you it was a happy day because it’s not,” the CEO yesterday told about 250 people gathered in a 42nd-floor conference room. “We will roll with the punches.”A Blockbuster spokeswoman, Karen Raskopf, declined to comment on the vote. The company’s shares, up 4.9% this year, rose 21 cents to $10.05 in composite trading on the New York Stock Exchange.Mr. Icahn, who didn’t attend the meeting, last night tried to settle his dispute with Mr. Antioco, he said in the interview. Talks related to changing the company’s corporate governance broke down at 4 a.m., he said.Mr. Icahn in December bought 5.8% of Blockbuster’s Class A stock and 5.07% of the company’s Class B stock, according to Bloomberg data. He now holds 9.7% of the Class A and 7.7% of the Class B shares.The 69-year-old investor has criticized how the business is managed all year, including suggesting that some initiatives to jump-start sales have been a waste. He favored buying rival Hollywood Entertainment, the no. 2 video-rental chain, a deal that Mr. Antioco pulled out of in March amid antitrust concern.Mr. Icahn also accused Blockbuster of overpaying Mr. Antioco, who received $51.6 million in compensation last year.The pay package “undermined management’s credibility in promoting its strategy,” said Nell Minow, editor of the Corporate Library, a firm that analyzes corporate governance practices. “I am not surprised that the company is adding an additional seat for Mr. Antioco, but I will be surprised if he stays in the job for very long.”On last week’s earnings conference call, Mr. Icahn was cut off by an operator when he asked if Blockbuster had received buyout offers. Mr. Antioco later said the company held discussions about buyouts and had not received a formal bid. Mr. Icahn today said he wants to make sure any offers “see the light of day.”In an interview on May 5, Mr. Antioco said he found Mr. Icahn’s tactics “personally disturbing.”The battle over board seats “is a significant distraction at a time when focus is critical,” he said.

Carl Icahn Wins Seat on Blockbuster’s Board

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