NCR Looking Into Sale of Blockbuster Express Kiosks12 Jul, 2011 By: Chris Tribbey
NCR Corp.’s chairman and CEO Bill Nuti said July 11 the company is looking at partnerships for its Blockbuster Express-branded kiosk business, or possibly even a sale.
Nuti said the company is exploring “the gamut” of options for its kiosk business, and already is in talks with several “interested parties.”
“In entertainment we undertook an initiative to grow in an adjacent self-service market, the DVD kiosk business,” Nuti said in a late July 11 conference call with investors, discussing the $1.2 billion acquisition of Radiant Systems, a hotel and restaurant software and hardware systems company. “While that initiative has been successful, it does not offer nearly the same type of complimentary industry [opportunity] as Radiant’s business.”
The latest development with the Express kiosks arose while NCR Corp. executives were discussing the acquisition of Radiant Systems.
Acquiring DVD Play and The New Release kiosk business along the way, NCR has grown its Blockbuster Express-branded kiosk business to approximately 9,000 kiosks nationwide, making it the biggest challenger to Redbox. But despite expectations of up to $200 million in revenue and as much as $20 million in earnings from its kiosk business in 2011, Nuti said the kiosks are not among the company’s top focuses.
“While entertainment remains an important self-service opportunity for us, we are actively exploring strategic options with a few active and interested parties,” Nuti said. “We have a few interested parties that are working with us right now and talking about that business.”
Eric Wold, research director with Merriman Capital in San Francisco, wrote in a research note that NCR is looking to move on due to a combination of factors: the new business opportunities the Radiant acquisition provides, increased competition from Redbox, and the legal fight over the Blockbuster brand with Dish Networks, which now owns the now-bankrupt Blockbuster.
“Redbox would be a logical buyer if NCR sold the kiosk division due to the spat with Dish Networks,” Wold wrote. “However, following Coinstar’s recent agreement to install coin-counting kiosks back in Safeway stores after an eight-year absence and the potential that this leads to additional kiosk concepts being added to Safeway stores, this changes our thinking.”
He said that if Redbox can move its kiosks into Safeway stores — which currently house Redbox-parent Coinstar’s coin counting machines, but host Blockbuster Express kiosks instead of Redbox — then it would likely pass on NCR’s kiosk business.
“There is no value to Redbox in the Blockbuster license; there is no value to Redbox in the physical kiosk assets (which would need to be replaced); and there is no value to Redbox in the studio distribution contracts as Redbox has its own and they would likely not transfer,” Wold wrote.
Instead, Dish — which is fighting NCR over the licensing agreement for the Blockbuster name — “is probably the most likely buyer,” Wold speculated.
Meanwhile, following the announcement of the Radiant acquisition, Dallas-based Kendall Law Group said it was launching an investigation into the deal, questioning whether Radiant’s board of directors had breached their contracts by “entering into the agreement without properly shopping for a deal that would provide better value for shareholders.”
Under the terms of the NCR acquisition, Radiant stockholders are to receive $28 for each share of Radiant stock. That’s a 28% premium over the company’s July 8 closing price of $21.95, the Kendall Law Group noted.
“The firm’s investigation seeks to determine whether Radiant Systems and its board undertook a fair process in negotiating the deal,” the law firm said in a news release.