Blockbuster takes control of Virgin games arm

BLOCKBUSTER Entertainment, the world's biggest video rental company, has bought a majority stake in Virgin Interactive Entertainment, part of Richard Branson's Virgin Group, valuing the company at more than dollars 250m, writes Nigel Cope.

VIE develops, publishes and distributes games software for systems such as Sega and Nintendo.

Blockbuster acquired a 19 per cent stake in VIE in January. Now it is buying a further 55 per cent for dollars 135m cash. Virgin will retain 10 per cent, with Hasbro, the US toy company holding the rest.

The deal ends speculation that the Virgin subsidiary would be floated in the US. Virgin also received overtures from Philips but turned them down in favour of Blockbuster.

Robert Devereux, VIE's chief executive, said the deal would enable the company to embark on the next stage of its expansion with more money for marketing and software development. The company would retain the Virgin name and the existing management would remain in place.

The retention of some equity in VIE leaves Virgin with a toehold in one of the larger players in the multimedia industry. Blockbuster has 4,250 shops and owns Spelling, the production group that made Dallas and Falcon Crest. The companies said Spelling is to buy out Blockbuster's entire holding of VIE in exchange for Spelling stock.

It also attempted to merge with Viacom, the cable company that was bidding for Paramount Communications.

Virgin says the cash raised will free capital for projects in radio, interactive software and possibly the consortium to run the Eurostar trains on the Channel Tunnel rail link.