THE UK's third-largest high street video rental chain was bought yesterday 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 company Filmnight.

The combined group will have annual revenues of more than £20m and a value of about £8.5m.

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

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

Filmnight reached an agreement with Vodafone last month to provide 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.

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

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