Coinstar buys 100% of Redbox

McDonald's selling stake in the DVD kiosk business

McDonald's is selling its stake in Redbox to Coinstar, which plans to put the DVD kiosks in a lot more locations.

The deal has Coinstar paying $176 million in cash, stock and other considerations primarily to GetAMovie, which is an affiliate of McDonald's, for its 44% stake in Redbox. Some money will go to various smaller stakeholders and, when the deal closes around Feb. 26, Coinstar will own 100% of Redbox.

Coinstar is best known for its self-serve coin-counting machines at grocery stores, but Redbox -- which rents DVDs for $1 a day via automated kiosks at fast-food restaurants, Wal-Mart and other venues -- has become a leading source of revenue for the company.

Therefore, Coinstar said it plans to install as many as 8,000 new Redbox kiosks this year, bringing the total to about 20,000. When Coinstar first invested in Redbox three years ago, it anticipated that the company would have only 10,000 kiosks by the end of 2009.

Coinstar COO Paul Davis said Friday that he expects DVD revenue to increase 80% this year to as much as $750 million, making Redbox the primary sales driver for Coinstar, which expects $1.3 billion in overall revenue this year.

Davis made the prediction during a conference call with analysts to discuss Coinstar's better-than-expected quarterly earnings results and guidance. The company posted a $4 million profit on revenue that rose 96% to $261 million. In the same quarter last year, Coinstar posted a $37 million loss.

Shares of Coinstar, traded on Nasdaq, shot up 23% on Friday to $27.18, giving the company a market capitalization of more than $780 million, nearly three times that of Blockbuster.
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