The bankrupt rental and retail video and game outlet confirmed last night [6] that it had selected DISH Network Corporation’s $320.6m bid following what it called a “robust” auction.

The auction was conducted under the supervision of the US Bankruptcy Court for the Southern District Of New York.

Under the terms of the purchase agreement, the Blockbuster estate will receive roughly $227m in cash distributions.

Cobalt Video Holdco has been selected as the back up bidder in the event the DISH transaction is unconsummated. Its bid was for $308.1m with a cash payment to the Blockbuster estate of approximately $210m.

A hearing before the bankruptcy court to approve the sale is scheduled for later today [7].

“We are delighted that a strategic bidder, DISH Network, recognised the value not only of Blockbuster’s assets, but also of our people, our store base and multi-channel offering,” chairman and CEO Jim Keyes [pictured] said.

The company and some of its domestic subsidiaries filed voluntary bankruptcy Chapter 11 petitions on Sept 23, 2010.