Outerwall to Be Taken Over by Apollo in $1.6 Billion Dealby
Investors in Redbox owner to get $52 in cash per share
Streaming-video competition has led to revenue decline
Outerwall Inc., the owner of Redbox DVD rentals and Coinstar cash-exchange kiosks, agreed to be acquired by private-equity firm Apollo Global Management in a deal valued at $1.6 billion.
Investors will get $52 in cash for each Outerwall share, a premium of 51 percent over the closing share price March 14, before the company’s board started exploring strategic alternatives, according to a statement Monday.
The deal gives Outerwall a way to retool its kiosk business under Apollo’s supervision after a three-year slump in revenue led to a collapse in its share price over the past year. The company was under pressure from investor Glenn Welling’s Engaged Capital, which agreed to add three directors to the board in April as part of a settlement.
Outerwall jumped 12 percent to $52.34 at 9:49 a.m. in New York. The shares had gained 28 percent this year through last week on speculation that the board’s strategic review could lead to a sale.
The company is scheduled to report second-quarter results on Thursday and won’t hold a conference call. Outerwall’s sales are projected to decline 11 percent this year to $1.96 billion, with competition from streaming-video downloads hitting Redbox’s revenue hard. Any potential buyer or partner may have a “hard time getting their arms around what the exact perpetual decline of RB’s business is,” Roth Capital Partners analyst Darren Aftahi said in a note before the Apollo deal was announced.
Morgan Stanley advised Outerwall, with legal help from Wachtell, Lipton, Rosen & Katz and Perkins Coie LLP. LionTree Advisors, Bank of America Corp.’s Merrill Lynch, Barclays Plc, Credit Suisse Group AG and Jefferies Group LLC advised Apollo, along with legal adviser Paul, Weiss, Rifkind, Wharton & Garrison LLP.