Chicken Soup for the Soul Entertainment to acquire Redbox
Chicken Soup for the Soul Entertainment, a consumer video and entertainment company, said Wednesday that it plans to acquire Redbox, the struggling video rental company, in an all-stock transaction.
Why it matters: The deal gives Chicken Soup for the Soul Entertainment direct-to-consumer distribution. It gives Redbox much-needed liquidity after its business took a hit due to COVID.
Catch up quick: Redbox runs several media distribution assets, including a DVD rental kiosk business, a TV on-demand platform and an ad-supported streaming platform. The company went public via a merger with a blank check company last year, but the market for those types of special IPO mergers has since devolved.
- Chicken Soup for the Soul Entertainment is a publicly traded video streaming company that focuses primarily on feel-good, ad-supported video content via two services: Popcornflix and Crackle.
Details: The combination of the two companies will create cost savings that will help both companies grow faster and become more profitable, Chicken Soup for the Soul Entertainment CEO Bill Rouhana told investors Wednesday.
- "This is a once in a lifetime combination," Rouhana said, noting ways the combination will help both companies grow faster.
- Chicken Soup needed an ad-supported video distribution service that Redbox has. Redbox needed content for its service.
- "There are really meaningful synergies in this transaction," said Rouhana, noting ways the combination will help both companies sell more ad-supported streaming ads. The company anticipates around $40 million in synergies per year through 2023.
By the numbers: Chicken Soup for the Soul Entertainment stockholders will own approximately 76.5% of the combined company after the deal closes, and Redbox stockholders will own approximately 23.5% of the combined company.
- By the end of this year, Chicken Soup expects a combined $500 million in revenue and between $100 to $150 million in adjusted EBITDA.
Be smart: Chicken Soup executives are very focused on ad-supported streaming, which is in part what makes Redbox a fit for the company's growth strategy.
- Rouhana said he believes ad-supported streaming is the future of television, and that Chicken Soup's investment in it will help it grow amid a turbulent market and a broader growth slowdown with subscription streaming.
- "Even in a recession ... the migration is so ferocious into AVOD (ad-supported video) that we'll still be sold out," Rouhana said. "We're in the right place at the right time."
What's next: The transaction is expected to close in the second half of 2022, barring any regulatory issues.