The private equity firm Apollo Global Management LLC has just forged a deal worth $1.6 billion in order to acquire Outerwall Inc., the company that owns and runs the Coinstar coin-cashing machines and Redbox automated video rental kiosks.
Forbes has it that the acquisition has Apollo’s funds paying $52 per Outerwall share, which is a premium of 11% over its closing price last Friday’s trading and 51% from the prince since March. It also picks up the company’s standing debt. At news of the buyout, Outerwall shares went up to $52.10 during pre-market trades – an 11% rise.
Redbox was originally funded by McDonald’s Corporation with Outerwall, then Coinstar, buying into it in 2005 and acquiring the brand entirely in 2009. At present, Outerwall has about 40,000 Redbox video kiosks operating in shopping centers, retailers and convenience stores throughout the US (after pulling out of a failed venture in Canada). The kiosks carry movie DVDs and video game discs for easy rental by shoppers. With the rise of streaming services like Netflix however, the demand for hardcopy DVDs plummeted. Outerwall’s other service Coinstar features 21,000 machines that can convert coins or gift cards into hard currency, as well as 2,000 eco-ATMs that buy up old and broken electronic devices like cellphones.
In 2015 Outerwall only made $44 million profits from $2.1 billion revenue, a painful decline from 2014’s revenue of $2.3 billion earning $107 million. It therefore believes that the buyout by Apollo Global Management will provide the aid it needs to boost its various kiosk businesses. Outerwall CEO Erik Prusch stated that Apollo is an ideal partner to support their company’s efforts to continue serving its millions of loyal customers and dedicated retail partners.
The $1.6 billion acquisition has already been approved by Outerwall’s board of directors, three of which were placed there by Engaged Capital, an activist investor of Outerwall’s. The transaction is expected to close during the year’s third quarter. Outerwall meanwhile will announce its quarterly earnings on Thursday July 27.
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