What happened
Shares of Redbox Entertainment (NASDAQ: RDBX) are tumbling 4.6% at 10:36 a.m. ET on Wednesday after it was announced the video rental kiosk owner would be acquired by Chicken Soup for the Soul Entertainment (NASDAQ: CSSE) in an all-stock deal that will see Redbox shareholders receive 0.87 shares of Chicken Soup for every Redbox share they own.
Trading of Redbox shares has been halted five different times this morning as the stock repeatedly plowed through circuit breakers. Shares of Chicken Soup, on the other hand, were trading 8.7% higher on the announcement.
Image source: Getty Images.
So what
Chicken Soup for the Soul Entertainment is the smaller of the two companies, worth about half of Redbox's $250 million valuation. It bills itself as "one of the largest operators of advertising-supported video-on-demand (AVOD) streaming services" and says the acquisition will create a leading independent, integrated direct-to-consumer media platform.
It certainly seems like a good deal for Chicken Soup, which will gain Redbox's 38,000 kiosks and its 40 million loyalty program customers, as well as its digital TV assets. Redbox investors, though, are getting shares in a company that has lost 82% of its value over the past year, though Redbox CEO Galen Smith says the deal is "ideal" because it helps the movie rental company transition from a physical to digital entertainment company.
Now what
The deal values Redbox at $375 million, which includes $50 million worth of Chicken Soup stock and $325 million in Redbox debt that's being assumed. Redbox went public last year via a reverse merger with a special purpose acquisition company (SPAC), but has reported mounting losses.
Chicken Soup shareholders will own 76.5% of the combined company while Redbox investors will own the remaining 23.5%.
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