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(Updates with Dish acquisition of U.S. unit in second paragraph.)
June 6 (Bloomberg) -- Dish Network Corp. is threatening Blockbuster Canada with the loss of its use of the Blockbuster logo, as part of a strategy to acquire its assets, Blockbuster Canada Co. said.
Blockbuster’s U.S. business, acquired by Dish, has asked for bankruptcy court permission to end an agreement with the Canadian unit over trademarks, Grant Thornton Ltd., a receiver for the Canadian assets said in court papers filed in Manhattan court today. Blockbuster Canada, with 400 stores and 4,000 employees, could have a “devastating termination” of its business if its stores were suddenly stripped of signs and other uses of the logo, the company said.
“By seeking to threaten Blockbuster Canada with the loss of its continued use of the Blockbuster trademarks in the Canadian business, Dish engaged in a stratagem to improve its position in its ongoing negotiations over the terms of acquiring the Blockbuster Canada business and assets,” Grant Thornton’s lawyers wrote.
Blockbuster Inc., once the largest video-rental chain, already has U.S. Bankruptcy Court approval to sell its assets to Dish for $320 million. Dish, based in Englewood, Colorado, is the second-largest U.S. satellite-television provider. Blockbuster Canada, not part of the U.S. Chapter 11 case, is also seeking U.S. protection from creditors under Chapter 15.
Dish had initially agreed to buy all of Blockbuster Canada’s stock, but “at the last minute” changed its purchase agreement to leave the shares out, Blockbuster Canada said.
Between April 2009 and June 2010, Blockbuster Canada transferred $31.4 million to the U.S. unit at its instruction, in “upstream transfers” and on Feb. 3, Blockbuster Canada was demanded to pay $70.19 million to cover Blockbuster U.S.’s unpaid bills to movie studios, according to court papers.
Blockbuster filed for bankruptcy in September with 5,600 stores, including 3,300 in the U.S., saying sales fell in recent years while rival Netflix Inc. grew by renting movies online and through the mail, and Coinstar Inc. put Redbox DVD vending machines in supermarkets and drugstores.
The case is In re Blockbuster, 10-14997, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
--Editors: John Pickering, Glenn Holdcraft
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