Wattles wants Hollywood back

Former CEO a 'potential investor' in Movie Gallery reorganization plan

By Cindy Spielvogel -- Video Business, 12/12/2007

DEC. 12 | After selling Hollywood Entertainment to Movie Gallery in 2005, Mark Wattles may be involved in a potential plan to buy the entire company.

Movie Gallery, which filed for Chapter 11 bankruptcy protection Oct. 16, plans to emerge from bankruptcy through an arrangement in which it will obtain an investment from Sopris Capital Advisors.

But Hollywood founder and former CEO Wattles “is a potential investor in connection with a possible competing reorganization plan,” according to court papers filed Dec. 11 in conjunction with the Movie Gallery bankruptcy.

The papers were filed as an objection to a Nov. 28 Movie Gallery rejection motion asking to sever its relationship with Wattles’ current company, Boards.

“It appears that the motive for the filing of the rejection motion may be to disincentivize competitive bidding or as retribution,” the objection from Boards stated.

Through Boards, Wattles retained about 20 Hollywood stores under a licensing agreement to keep the Hollywood trademarks. The agreement has been profitable for Movie Gallery, according to Boards, amounting to more than $900,000 annually in royalties.

The agreement also included an option for Boards to sell the stores to Movie Gallery, and that matter has been the subject of an ongoing dispute over the purchase price. Now, however, Movie Gallery wants to sever all ties with Wattles—with him keeping the stores and changing the Hollywood name.

Boards is now willing to drop the sale option, according to the papers. But the company does not want to sever its licensing agreement for the Hollywood trademarks.

Wattles sold Hollywood to Movie Gallery in 2005 for more than $1 billion, which is also the amount of the debt load that led the video chain into bankruptcy.