Redbox (NASDAQ:RDBX) has agreed to be acquired by Chicken Soup for the Soul Entertainment (NASDSAQ:CSSE) in an all-stock deal just over six months after Redbox closed a SPAC deal with Seaport Global.
Redbox shareholders are to receive 0.087 Chicken Soup shares for each of their shares, which, at Chicken Soup’s Tuesday closing price would equate to a $0.689 per share offer. This is quite a concession as this is effectively an 88% discount on Redbox’s last closing price if $5.60. It has understandably plummeted 49% in early trading on news of the deal.
Chicken Soup is meanwhile up about 8.7% on in the on news of the deal, so the price may realign more in the favor of Redbox shareholders by the time the deal closes in the second half of 2022.
In the long-term, it may also provide a better future for Redbox shareholders. Illinois-based Redbox runs DVD-rental services out of about 38,000 physical kiosks in big box retail locations as well as a nascent streaming platform, and it may have had limited prospects given the changing technology and retail landscape around it.
By this point, Redbox’s most valuable assets were likely its physical space in these locations for marketing or sales of other goods as well as the customer book comprised of its roughly 40 million loyalty members. Its pivot to streaming was in the early goings and entailed stepping into a highly competitive arena.
Chicken Soup, meanwhile, has itself made a major transition from a popular line of branded books in the 90’s to a more diversified platform of videos on demand (VOD). The two companies might well have more value together than apart.
Redbox faced 85.9% redemptions when it closed in October 2021 at a time when the SPACs were averaging 59.7% shares redeemed on average for the month. The shareholders that remained will now own a 23.5% stake in the combined company, which is expected to have a run-rate of $500 million and $100 million to $150 million in adjusted EBITDA.
Redbox meanwhile reported $288 million in net revenue for an operating loss of $143 million in 2021. It also announced at the beginning of April that it was laying off 10% of its staff and had pulled the last $15 million available on its revolving credit facility.