Redbox Owner to Go Private for $1.6 Billion in Cash

25 Jul, 2016 By: Erik Gruenwedel

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Redbox corporate parent Outerwall July 25 announced it has entered into a definitive merger agreement with a private equities group for $1.6 billion in cash. The deal, which calls for Apollo Funds to pay Outerwall common stock shareholders $52 per share — 51% above market value — is expected to close by the third quarter.

Following the transaction, Outerwall will become a privately held company and its shares will no longer be listed on any public market exchange.

The deal would enable Outerwall to distance itself from investor pressure as it continues to generate significant revenue from Redbox while attempting to diversify in other kiosk-related businesses beyond the Coinstar coin-changing subsidiary.

Indeed, Michael Pachter, media analyst with Wedbush Securities in Los Angeles, downgraded the company’s stock to “neutral,” citing a lack of “near-term catalysts.”

“While Outerwall has a share repurchase plan in place and utilized it extensively over the recent past, we do not anticipate further share repurchases through 2017 given activist shareholder pressure to focus on reducing debt,” Pachter wrote in a note before the private equity deal was announced.

“We expect the company to continue to drive shareholder value … but we think DVD rentals will likely be under pressure from the upcoming Olympics in the interim.”

Eliminating such shareholder pressure is precisely why Outerwall is going private.

"Apollo is an ideal partner to support Outerwall's efforts to continue serving millions of loyal customers and dedicated retail partners through our unrivaled network of kiosks and automated retail offerings. We look forward to working closely with Apollo as we continue to strengthen our businesses and execute on our strategic plan,” CEO Erik Prusch said in a statement.

Outerwall reports Q2 financial results July 28.

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