Redbox Parent Company Sold to Private Equity Firm for $1.6B

RedBox DVD Rental Kiosks - H - 2009
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Outerwall, the parent company of the Redbox DVD and video game kiosks, had been exploring strategic and financial alternatives, including an outright sale of the company.

Redbox parent Outerwall has been sold to funds associated with Apollo Global Management for $52.00 a-share, or around $1.6 billion, including debt.

The move follows Outerwall, the DVD kiosk rental company, in March hiring Morgan Stanley as its financial adviser to explore a sale or other initiatives after movie rentals fell short of expectations as consumers increasingly opt for Blu-ray rentals. Shares in Outerwall jumped Monday morning by $5.24, or 11 percent, to $52.15 on news of the deal.

"Outerwall's board of directors has undertaken a comprehensive review of a wide range of strategic and financial alternatives to maximize value for all Outerwall shareholders. We are pleased to reach this agreement, which follows a robust process and provides an immediate and substantial cash premium to our shareholders," Erik Prusch, Outerwall's CEO, said Monday in a statement.

Redbox operates around 40,000 kiosks in varied retail outlets, including grocery stores and malls, in North America, the UK and Ireland, and another 21,000 Coinstar kiosks. Financing for the buyout deal is provided by Bank of America Merrill Lynch, Jefferies Finance, Barclays and Credit Suisse.

The Outerwall board recommended shareholders accept the transaction to take Redbox private, a deal expected to close in the third quarter of 2016. Apollo partner David Sambur in his own statement welcomed the acquisition.

"Outerwall is a dynamic customer-focused business that delivers superior kiosk experiences that delight consumers and generate value for its retailer partners," Sambur said. Apollo invests in consumer and retail, satellite and wireless and media businesses, among the around $173 billion in assets it has under management.