Investment firm Apollo Global Management is set to acquire Outerwall, the owner of struggling DVD-rental kiosk chain Redbox, for $1.6 billion.
Apollo, headquartered in New York, will acquire Outerwall's outstanding shares of common stock for $52 per share. The all-cash deal, which was announced Monday, includes net debt and is expected to close in the third quarter of 2016. Outerwall, headquartered outside Seattle, will become a privately held company following the sale, and its common shares will be delisted from public markets.
The transaction was unanimously approved by Outerwall's board of directors. Outerwall also owns Coinstar, a chain of kiosks that convert loose change into paper currency. Apollo partner David Sambur expressed optimism about the acquisition in a statement released Monday.
Outerwall's growth has been stunted in the wake of Redbox's ongoing financial difficulties.
The automated kiosks, which offer Blu-ray, DVD and video game rentals, have struggled to compete with the rising popularity of digital streaming services such as Netflix. Redbox is one of the last major retailers that offer physical movie and video game rentals.
Outerwall has estimated it would close as many 2,000 Redbox kiosks during 2016. It had 40,480 kiosks as of Dec. 31.
Redbox partnered with Verizon to launch a streaming service in 2013, but it failed to gain significant traction and was shut down the following year. Although the company began quietly testing a new streaming service titled Redbox Digital last week, the service is in its early stages and is not open to the public.
Shares in Outerwall jumped more than 11 percent Monday to $52.23 following the Apollo announcement. But they remain well below what they were a year ago when shares were worth nearly $82.
Apollo shares remained virtually unchanged at $16.56.
Though Outerwall's Coinstar business has continued to enjoy success, Redbox's revenue suffered noticeably in first-quarter revenue reports.
Redbox revenue plummeted 19 percent to $421.5 million in the first quarter compared to the same period a year ago.
Outerwall generated $536 million revenue during the first quarter, down 12 percent from the same period in 2015, primarily because of a $98 million decrease in Redbox revenue. Net income rose 8 percent to $38.5 million in the quarter.
Outerwall plans to release its second quarter earnings after markets close on Thursday.
