Citi Maintains 'Buy' Rating on Blockbuster (BBI), LBO Still Offers Attractive Return Potential

September 23, 2008 9:35 AM EDT

Citi maintains a Buy rating on Blockbuster (NYSE: BBI), saying LBO offers attractive return potential. Price target $7.

Citi analyst says, "Despite last week's market turbulence and run up in the stock (BBI closed up 46% on the week), our belief that a BBI LBO offers attractive return potential remains unchanged...Deal Would Give Management Breathing Room — Aside from the financial benefits, a deal would give BBI time to complete the restructuring/five point distribution implementation without public market pressures. Also, we would expect the current market pessimism would improve by the time of a spin out...We expect BBI to benefit from: 1) continued market share gains from MOVI and other in-store competitors, 2) cost reductions, 3) improvements in Total Access profitability, 4) improvements in pricing/rental terms, and 5) the ongoing realization of the five point distribution strategy."

Blockbuster Inc. (Blockbuster) is a global provider of rental and retail movie and game entertainment, with over 7,800 stores in the United States, its territories and 21 other countries as of January 6, 2008.

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