Outerwall Inc. (OUTR), owner of the Redbox DVD dispensers, rose as much as 11 percent in extended trading after saying it will buy back $350 million of its stock.
The company, based in Bellevue, Washington, rose as high as $70.50 after the announcement, which was accompanied by fourth-quarter results and a series of management changes, including the appointment of a former Warner Bros. executive as president of Redbox. The stock gained 0.7 percent to $63.64 at the close in New York.
Outerwall said it will begin a tender offer for its shares tomorrow. That would come on top of the $195 million in stock repurchased last year and represents about 22 percent of the total outstanding shares, based on the company’s current market value of $1.62 billion.
The company, under pressure from activist investor Jana Partners LLC to generate more value for shareholders, has said it will return 75 percent to 100 percent of annual free cash flow to investors which in the near term would be in the form of share repurchases.
“They’re buying back a lot of their stock, and come tomorrow, you’re going to see huge demand for their shares,” said Michael Pachter, an analyst at Wedbush Securities in Los Angeles. “You don’t have many companies with more than 20 percent of their shares being available for buyback in such a short period,” said Pachter, who has an outperform rating on the stock, the equivalent of buy.
Outerwall also said today that Mark Horak, most recently president of the Americas at Warner Bros. Home Entertainment, will become president of Redbox on March 17. Jana disclosed a 13.5 percent stake in Outerwall on Oct. 4, saying the company is undervalued and it intends to seek a sale of some or all of its businesses.
In December, Outerwall exited its Rubi coffee, Crisp Market and Star Studio ventures, it said today, taking a $29.5 million charge in the quarter.
The company, which also operates the Coinstar change-counting machines, said James H. Gaherity will become president of that division, succeeding Mike Skinner, who is leaving. Maria Stipp, who served as chief new ventures officer and interim president of ecoATM since October, has been appointed president of that unit.
Outerwall reported profit in the fourth quarter of $1.68 a share, on an adjusted basis, compared with $1.01 a year earlier. That beat the $1.24-cent average projection by analysts, according to data compiled by Bloomberg. Sales rose 5.4 percent to $593.7 million, trailing the $596.7 million average analyst estimate.
Net income fell 0.9 percent to $22.7 million, or 82 cents a share, from a year earlier.
In the quarter ending March, Outerwall forecast profit of 77 cents to 97 cents a share, on revenue of $570 million to $600 million. Analysts on average had projected $1.29 a share, on sales of $612.1 million.
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