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Report: Coinstar in Sale Talks

16 Aug, 2012 By: Chris Tribbey, Erik Gruenwedel

Coinstar reportedly is in talks with a private equity firm — negotiations that have intensified in recent days, according to The New York Post, which cited sources.

Coinstar, which owns Redbox and operates a coin-trading business, among others, is expanding kiosk vending operations into new markets (coffee, electronics) and foreign territories — all growth areas appealing to investment firms. At the same time, analysts say the company has been undervalued for years as investors question Coinstar’s substantial investment in the disc rental business and its reliance on new releases, which three major studios embargo to Redbox on street date.

“I’ve always viewed Coinstar as the acquirer, and if they were going to sell something to private equity that it might be the coin-counting business,” B. Riley & Co. analyst Eric Wold said in an email. “But given the disrespect Coinstar has received from the market, it might be the only way to find value.”

Coinstar CEO Paul Davis, during a presentation to investors Aug. 16, denied the contents of the Post story, saying “We have no idea where it came from.”

“We are not in the business of commenting on other people’s stories,” Davis said. “We’re head down, focused on running the business.”

Though many have been down on DVD rental, all the back to when Coinstar first invested in Redbox in 2005, “We continue to believe that Redbox is now dominating a rental segment that will see consumer demand for many years to come,” Wold wrote. “We do not project that digital rental revenues will eclipse physical rentals for at least another 5-7 years, and by then Redbox will be a huge cash-generating machine.”

Later this year Redbox will launch its joint venture with Verizon, which will combine kiosk rentals with online streaming.

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