Oregon- A coalition of family and religious groups is opposing Movie Gallery Inc.'s proposed buyout of Wilsonville-based Hollywood Entertainment Corp., http://adultfyi.com/read.aspx?ID=8302 fearing that the Alabama-based chain would stock some of Hollywood's 2,000 movie-rental stores with adult videos. The Campaign for Corporate Responsibility bought full-page ads in Wednesday's editions of three newspapers -- The Oregonian, USA Today and The Washington Post -- urging Hollywood's board and its shareholders to reject Movie Gallery's $13.25-a-share bid to buy Hollywood. Movie Gallery, the nation's No. 3 movie-rental chain by revenue, would also assume about $350 million in debt for Hollywood, the nation's No. 2 chain.
The coalition includes Citizens for Community Values, based in Cincinnati, and American Family Association, based in Tupelo, Miss. Stronger Families of Oregon, in Salem, also is a member of the coalition.
Many of Movie Gallery's movie-rental stores carry videos with an NC-17 rating or no rating. The coalition contends such movies are "very damaging," said Randy Sharp, director of special projects for American Family Association, which has led a boycott against Movie Gallery for four years.
"It creates a very hostile environment wherever this material is viewed, an aggression towards women and in many cases to children," Sharp said.
A Movie Gallery spokesman did not return several calls seeking comment. It is unclear whether the chain would seek to add adult titles to offerings at Hollywood Video stores, which do not carry adult and NC-17 movies.
The campaign comes as the country's No. 1 movie-rental chain, Blockbuster Inc., is making an offer directly to shareholders to buy Hollywood for $14.50 a share in cash and stock.
Although Blockbuster does not carry NC-17 or adult videos, the coalition said its action is not meant to be an endorsement of the Blockbuster bid. It said it receives no funding from the Dallas-based chain. A Blockbuster spokesman also denied any involvement in the campaign.
One analyst who covers all three companies called the coalition's effort a "smear campaign" and a "scare tactic."
"If (shareholders) are really concerned about damage by adult videos, they should take it to the local city council," said Dennis McAlpine, of McAlpine Associates.
Another analyst, Michael Pachter of Wedbush Morgan Securities, said Movie Gallery likely would take its cues from the communities on whether to offer a selection of adult movies.
"If the community doesn't want it, they probably won't do it because why would you alienate your customers?" Pachter said. Adult video rentals might be 10 percent of Movie Gallery's business, he said. Logically, he added, a company would not engage in practices that would irk the other 90 percent.
The coalition is also calling on members of the public to urge the U.S. Department of Justice to investigate whether Movie Gallery is violating any laws by offering adult videos.
And more efforts may follow, said Phil Burress, president of Citizens for Community Values.
Hollywood founder Mark Wattles, who resigned as chairman and chief executive earlier this month, has for years said he would not stock adult titles. Wattles, who is a Mormon, said he opposes carrying such movies because of his religious, family and personal beliefs.
Wattles has received hundreds of e-mails, he said, from advocates of American Family Association and others asking him about his position on the Movie Gallery deal, he said Wednesday from Colorado. The state is home to Ultimate Electronics Inc., of which Wattles has held a controlling interest since Jan. 12.
Although Wattles declined to say how he would vote his 10 percent stake in Hollywood on the Movie Gallery offer, he said he would not work for a company that carried adult movies.
On Wednesday, Hollywood shares closed down 21 cents, at $13.89. Shares of Movie Gallery closed up 18 cents, at $21.85. Both trade on the Nasdaq Stock Market. Shares of Blockbuster closed down 9 cents a share, at $9.22, on the New York Stock Exchange.
