BELLEVUE, Wash. — Coinstar, Inc. today announced its intent to purchase the remaining stake of Redbox Automated Retail LLC, an automated DVD rental service, from GetAMovie Inc. and other minority interest holders. Upon closing these transactions, Coinstar is expected to own 100 percent of Redbox.
With 35 million unique customers and 12,000 locations, redbox is the leading renter of DVDs through self-service kiosks in the United States. Redbox rents the latest movie releases for $1 per night and allows consumers to rent in one location and return at another location. Redbox can be found nationwide in select McDonald's restaurants, leading grocery stores, and Walmart and Walgreens stores in select 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, chief operating officer at Coinstar Inc. "Redbox has a strong business model and management team and we look forward to seeing continued growth as a combined company."
Industry research indicates that the majority of consumers prefer physical media such as DVDs, and while emerging technologies such as digital downloads and video on demand are growing, consumer acceptance is still low. Other research shows DVD rental transactions in 2008 increased 1.8 percent to 2.6 billion over the prior year. Redbox represents about 9 percent of the overall DVD rental market, and is the leading provider in kiosk rentals.
Coinstar has agreed to acquire GetAMovie Inc.'s 44.4 percent voting interests in Redbox and GAM'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 GAM $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. In addition, Coinstar will pay deferred consideration to GAM 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 with GAM also provides that in no event will the shares of Coinstar common stock issued to GAM as consideration exceed 5,653,398 shares. At least 50 percent of the deferred consideration is payable by July 31, 2009 and the remaining portion is payable by October 30, 2009. The total consideration to be paid to GAM is expected to be between approximately $134 million and $151 million. GAM 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 non-voting interest holders in redbox. Consideration will be paid on similar terms to those of the GAM 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.
