It expects to close the acquisition by the end of November, which will result in an increase the company's number of deployed DVD rental kiosks to more than 600. Upon close of the acquisition, the company's [image-nocss] total DVD kiosk portfolio will be located at a combination of grocery store chains and locations on U.S. military bases.
Global Axcess offers InstaFlix, a Nationwide Ntertainment Services Inc. business line. InstaFlix offers an ownership model merchants contract directly with Nationwide Ntertainment Services to own and operate the InstaFlix DVD kiosk in their retail locations. Under this model, Nationwide Ntertainment Services owns the InstaFlix DVD kiosk and provides a total turnkey solution to the merchant.
The company said that it believes the acquisition will be immediately accretive, adding more than $1 million of EBITDA in 2011 and increasing revenues by more than $4 million.
Tejas Video's primary contract is with The Army & Air Force Exchange Service (AAFES) for DVD rental kiosks, which currently includes 250 kiosks deployed at 220 locations on more than 70 bases. Tejas also has a contract with a small Texas-based convenience store chain for 10 additional DVD rental kiosks. AAFES currently operates facilities at more than 100 domestic and 400 military bases abroad. AAFES, operates facilities worldwide, in more than 30 countries, five U.S. territories and 50 states. It operates approximately 181 main stores and more than 1,000 fast-food restaurants.
"The addition of Tejas to our core business is substantial in not only the financial impact on Day 1, but also in helping us leverage what they have learned from being in the kiosk business for the past six years," said George McQuain, CEO of Global Axcess. Tejas is a stable business with an experienced management team that is generating positive EBITDA annually and has generated revenues of approximately $4.1 million in 2009. They have also demonstrated an ability to keep customers satisfied and committed to long term relationships. A clear indication of this was shown in Tejas recently defeating a major competitor for the renewal of the AAFES contract; AAFES elected to renew its initial five-year contract with Tejas for another five years."
Von Shows, president of Tejas Video, said, "This acquisition demonstrates a commitment by both companies to provide best-in-class service to existing and potential customers. Tejas has longstanding knowledge and expertise in the unattended DVD rental market; while Global Axcess brings financial strength, operational excellence and an established corporate infrastructure to assist in strategically building on what we have already begun to build with the U.S. military community. This combination is a win-win, and I'm looking forward to assisting in future growth."
Marc Caramuta, COO of Global Axcess, said, "Tejas Video has developed a highly efficient and effective operational platform in the DVD kiosk space, which can assist our already successful momentum into this space. We look forward to leveraging their team of talent and knowledge to affect positive results as we scale those efficiencies into a larger share of the DVD kiosk market--in the government sector as well as our growing footprint in the private sector."
McQuain concluded, "This acquisition will enable us to gain access to greatly expanded market opportunities, to rapidly deliver new DVD kiosk deployments, and to achieve synergies in our operations and knowledge base."
Terms of the agreement, while currently undisclosed, include a cash payment at deal closing, an additional cash payment within 120 days after deal close and restricted shares of common stock. Terms also include an earn-out opportunity if certain performance milestones are achieved on additional kiosks deployed in locations currently without a DVD kiosk. The company anticipates that it will fund the acquisition partly with its own cash and mostly through a facility with its senior lender, Fifth Third Bank. The future earn-out opportunities will be funded through the future operations of the Tejas business.
Headquartered in Jacksonville, Fla., Global Axcess provides turnkey ATM and other self-service kiosk management solutions that include cash and inventory management, project and account management services. Global Axcess Corp currently owns, manages or operates more than 4,900 ATMs and other self-service kiosks in its national network spanning 43 states.
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