Shares of Redbox (NASDAQ:RDBX) are down over 25% after Chicken Soup for the Soul Entertainment (NASDAQ:CSSE) announced it had entered into a definitive agreement to acquire it. RDBX stock was down as much as 50% in the pre-market session.
Chicken Soup is one of the largest players in the advertising-supported video-on-demand (AVOD) streaming services industry. Famously known for its wholesome children’s books, Chicken Soup has thrust itself into the world of streaming. In 2017, the company acquired Popcornflix, and in 2019, it acquired Crackle from Sony (NYSE:SONY).
With that in mind, let’s jump into the details of the definitive agreement.
Chicken Soup for the Soul Entertainment to Acquire RDBX Stock
Under the terms of the agreement, CSSE will acquire Redbox for $375 million. The all-stock deal will include $50 million in CSSE stock and the remaining will be the assumption of $325 million of Redbox debt. Redbox shareholders will receive 0.087 of a share of class A common stock of CSSE stock for each Redbox share owned. After the acquisition, Chicken Soup holders will own 76.5% of Redbox, while Redbox shareholders will own 23.5%.
Chicken Soup CEO William J. Rouhana Jr. was highly supportive of the acquisition. He added that:
“Redbox has 40 million customers in its loyalty program and high-potential digital television assets including carriage of over 130 FAST digital channels on its Free Live TV platform, as well as a robust TVOD and PVOD platform. Together, we will build a fully developed AVOD and FAST streaming business.”
The combined company will have “increased scale across content production and distribution” and operate more than 38,000 kiosks across the country. Meanwhile, Chicken Soup will have access to Redbox’s almost 40 million Redbox Perks members.
What’s Next For Redbox?
The two companies will be able to cross-sell their customer bases. As a result, the combined company expects to post a “annual-run rate cost synergies in excess of $40 million in 2023.”
By the end of 2022, Chicken Soup believes that the combined company will have a revenue run-rate exceeding $500 million. On top of that, Chicken Soup expects a run-rate of $100 million to $150 million of adjusted EBITDA.
The transaction is expected to close during the second half of this year, subject to regulatory approvals and customary conditions. Upon closing, the combined company will maintain the Chicken Soup for the Soul Entertainment name and trade under CSSE.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.