Video chain bought by online rival

The UK’s third-largest high street video rental chain was today bought in a move by an online rival to create a “bricks and clicks” service.

Apollo, which has 65 branches around the UK as well as a franchise operation in 200 other stores, confirmed that it had agreed a cash-plus-shares deal with DVD rental firm Filmnight.

The combined group will have annual revenues of more than £20m (€28.2m) and a value of around £8.5m (€12m). No price tag was put on the deal.

Filmnight was set up last year by former Electrolux executive Andrew Bentley and has previously bought PriceStorms, a retailer of DVDs on the internet.

Mr Bentley, who will remain executive chairman, said: “Our new structure is part of our strategy for a complete ‘bricks and clicks’ consumer offer.”

The Apollo stores become the high street channel of Filmnight, operating in partnership with its digital offering through the website – www.filmnight.com - and mobile division.

Filmnight shook hands with mobile phone giant Vodafone last month to provide exclusive film content for its 3G services such as movie trailers, celebrity gossip and competitions.

Activity in the online DVD rental industry has been frenetic this year led by the merger of ScreenSelect.co.uk and Video Island in the summer.

Home Entertainment, which owns the Choices chain of video stores, agreed a partnership earlier this month with online DVD rental firm Lovefilm.

At the same time, US giant Blockbuster has entered the online rental market and Netflix has signalled that it also wants a slice of business in the UK.

The DVD rental market is predicted to be worth £376.1m (€530.7m) by 2006 and the number of households with DVD players is expected to rise by 32% to 18.6 million by the same date.

In a statement today, Filmnight said the joint managing directors of Apollo would remain with the enlarged company.

Neil Whitfield would retain responsibility for the high street branches in his new role as managing director of store operations, while Kevin Morris would continue to advise on franchise services.

Mr Whitfield said: “This deal will allow us to diversify our revenue streams within the store environment and to take advantage of increased marketing and promotional opportunities provided by Filmnight.”