Dothan Based Movie Galley Announces Buyout of Rival Company

A merger announced Monday would pair the nation's number two and three video rental chains.

A Dothan-based Movie Gallery says it has an agreement to purchase Hollywood Entertainment for $850 million and assumption of $350 million in debt.

Movie Gallery will buy all of Hollywood's outstanding shares for $13.25 each, a premium of 1.5 percent over Friday's closing stock price. The deal is seen closing in the second quarter.

Hollywood Entertainment operates more than 2,000 Hollywood Video stores and more than 700 Game Crazy units. The combined company will have about 4,500 stores in the U.S., Canada and Mexico.

Rival Blockbuster had earlier offered $11.50 a share in cash as well as debt assumption.