BELLEVUE, Wash. -- Coinstar Inc. has announced its intent to purchase the remaining stake of automated DVD rental service Redbox Automated Retail LLC from GetAMovie Inc. and other minority interest holders. Upon closing these transactions, Coinstar is expected to own 100% of Redbox. Claiming 35 million unique customers and 12,000 locations, Redbox is the leading renter of DVDs through self-service kiosks in the United States.
The kiosks rent the movies for $1 per night and allow consumers to rent in one location and return at another location. Redbox can be found nationwide [image-nocss] at more than 90,000 locations in select McDonald's restaurants; grocery stores, convenience stores, drug stores and restaurants; and mass merchants including Wal-Mart and Walgreens in selected markets.
"Redbox has been a great addition to our 4th Wall product portfolio, and we are very enthusiastic about the DVD rental kiosk market having seen tremendous growth and acceptance over the past few years," said Paul Davis, COO at Coinstar Inc. "Redbox has a strong business model and management team and we look forward to seeing continued growth as a combined company."
Redbox represents about 9% of the overall DVD rental market, Coinstar said, and is the leading provider in kiosk rentals.
"Redbox has a very positive and cooperative relationship with Coinstar and we're pleased with today's announcement," said Gregg Kaplan, CEO of Redbox, Oak Brook, Ill. "The growth of the self-service DVD rental market continues to be brisk, and the combination of $1-per-night pricing and the extreme convenience offered by Redbox continues to be enthusiastically embraced by consumers."
On Feb. 12, 2009, Coinstar entered into an agreement with GetAMovie Inc., an affiliate of Oak Brook-based McDonald's Corp. Coinstar has agreed to acquire GetAMovie's 44.4% voting interests in Redbox and GetAMovie's rights, title and interest in a $10 million promissory note made by Redbox, in exchange for a combination of cash and Coinstar common stock.
Coinstar will initially pay GetAMovie $10 million in cash and 1.5 million shares of Coinstar common stock on the closing date, which is expected to be on Feb. 26, 2009. Also, Coinstar will pay deferred consideration to GetAMovie that will be payable in cash and/or shares of Coinstar common stock at Coinstar's election and subject to the satisfaction of certain conditions. The agreement also provides that in no event will the shares of Coinstar common stock issued to GetAMovie as consideration exceed 5,653,398 shares. At least 50% of the deferred consideration is payable by July 31, 2009, and the remaining portion is payable by Oct. 30, 2009. The total consideration to be paid to GetAMovie is expected to be between $134 million and $151 million. GetAMovie will be entitled to registration rights under the Securities Act of 1933, as amended, with respect to the shares of Coinstar common stock acquired in connection with the transaction.
In addition, Coinstar is expected to purchase the remaining outstanding interests of Redbox from minority interest and nonvoting interest holders in Redbox. Consideration will be paid on similar terms to those of the GetAMovie purchase agreement. The total consideration to be paid in these transactions is expected to be between $21.5 million and $24.9 million. The closing of these transactions are subject to various closing conditions.
Coinstar has amended its credit agreement to facilitate the transactions.
Bellevue, Wash.-based Coinstar is a multi-national company offering a range of 4th Wall solutions for the retailers' front of store consisting of self-service coin counting, DVD rental, money transfer, electronic payment solutions and entertainment services.
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