BLOCKBUSTER, the American video rental giant, has acquired the Xtra vision group and its chain of 225 stores in the Republic and Northern Ireland.

No price has been disclosed, but given that Xtra vision had cash flow of £5 million last year, a consideration of £20 million is thought to be involved. Industry sources say that a multiple of four times cash flow is the norm for a cash generative business such as Xtra vision.

The acquisition will mean substantial capital gains for the two shareholders British venture capital groups 3i and HSBC Private Equity, which, in July, 1994, bought Xtra vision out of examinership for £4 million and undertook to restructure the bank borrowings over a five year period. The Xtra vision group has sales of £25 million about £18 million in the Republic and £6.8 million in Northern Ireland and has combined profits of £3.7 million split £3.2 million in the Republic and £500,000 in Northern Ireland. The group is now debt free with net cash in its balance sheet.

The Northern Ireland stores were originally sold to a management group after the former management of Xtra vision decided to concentrate on the US. They were subsequently bought back by Xtra vision in 1995.

A spokesman for Blockbuster said that no decision has been taken on whether the Xtra vision and Maxim stores will be rebranded under the Blockbuster banner. But sources have emphasised that Blockbuster is aware of Xtra vision's brand awareness in the Irish market and might be reluctant to make any changes. It is understood that Xtra vision's chief executive, Mr Peter O'Grady Walshe, will be remaining on under the new ownership.

Blockbuster's chairman and chief executive officer, Mr Bill Fields, said. "Blockbuster is intent on locating our successful entertainment retailing concept in both established and developing markets worldwide. The combination of Ireland's high VCR penetration and the quality customer base established by Xtra vision makes this a great place for Blockbuster."

Market research for Xtra vision has indicated that 94 per cent of video renters are aware of the chain and that 33 per cent of all adults claim membership. The survey indicates that 72 per cent of all Irish households have a video recorder compared to 79 per cent in the UK.

Blockbuster part of the American entertainments group, Viacom has over 5,300 stores worldwide and over 700 in the UK alone. It is estimated to have 21 per cent of the British market, with four million members. Blockbuster has a target of 2,000 stores in Europe by the year 2000.