Business

Redbox owner gains as investors wage buyout war

Barry Rosenstein is looking to shake up Outerwall — and see if a few coins fall out.

Shares of the company that operates the Coinstar cash-changing machines and the Redbox DVD rental kiosks rallied 4 percent Monday after Rosenstein’s hedge fund Jana Partners disclosed a 13.5-percent stake.

Jana Partners, the $7 billion fund firm, in a securities filing late Friday, signaled it will press Outerwall’s management to explore strategic alternatives including a possible sale of the Bellevue, Wash., company.

In fact, Outerwall shares had surged as much as 12.6 percent Monday before closing at $59.36.

Outerwall, which changed its name from Coinstar in June, responded in a written statement Friday that its board and management “regularly review the company’s strategic priorities and opportunities, including capital allocation, and assess a variety of strategic options.”

Nevertheless, sources say the firm lately has rebuffed fresh approaches from buyout firms, who have been trying since last year to take the company private.

“They don’t return calls,” a source said of Outerwall’s board, referring to private-equity overtures that have gone nowhere.

Until Friday’s 9.6 percent stock run-up, Outerwall shares were flat in 2013.

While fending off approaches from buyout firms, Outerwall’s board has likewise given the brush-off to activist investors. Last month, the company took heat for a slashed profit forecast that hammered its stock in the wake of a share buyback.

Outerwall officials didn’t respond to requests for comment Monday.

Speculation about possible buyers recently has focused on Providence Equity, which, sources said, bid unsuccessfully for the company last summer.

Indeed, insiders speculate that, having exited Hulu late last year, Providence CEO Jonathan Nelson is seeking a way to reenter the video rental and streaming business.

Providence, whose investments have included Univision, the Yes Network and Hulu, didn’t immediately respond to requests for comment Monday.

In addition to a sale of all or parts of the company, some shareholders have pressed management to return some of the company’s healthy cash flow to shareholders as a dividend.

Critics lately have blasted Outerwall’s management for focusing too much time and money on a hodgepodge of smaller start-up businesses including photo booths, food and coffee dispensers and a controversial cellphone exchange kiosk called ecoATM.

The company rings up most of its revenue from its more than 42,000 Redbox machines across the country.

The latter, which Coinstar acquired in July for $350 million, has drawn scrutiny from law-enforcement officials amid complaints that the machines are encouraging thieves to steal cellphones.

Additional reporting by Claire Atkinson