Chicken Soup for the Soul Entertainment, owner/operator of the ad-supported Crackle+ streaming platform, is set to acquire Redbox Entertainment, operator of more than 38,000 DVD rental kiosks and branded digital entertainment properties, in an all-stock transaction valued at $375 million.
The deal continues a harried fiscal existence for Redbox since going public last October following a merger with a special purpose acquisition company, or SPAC. Redbox earlier this year disclosed it lost $140 million in 2021, its businesses undermined by the pandemic and supply issues. Last month, it laid off 10% of its workforce, or about 150 employees.
The combination of Chicken Soup for the Soul Entertainment and Redbox is intended to create an integrated direct-to-consumer media platform. The combined company will have increased scale across content production and distribution, with a large content library, extensive digital capabilities in AVOD, TVOD, PVOD and FAST, and access to millions of targeted customers, including nearly 40 million Redbox Perks members.
Together, the combined companies will have some of the industry’s top AVOD platforms, one of the fastest growing segments of the overall entertainment industry. According to a recent study by IAB, ad spending on connected TV platforms increased 57% from 2020 to 2021 and is expected to increase another 39% this year.
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“Today marks a transformative moment for Chicken Soup for the Soul Entertainment and an inflection point for the ad-supported streaming industry,” William J. Rouhana Jr., chairman and CEO of Chicken Soup for the Soul Entertainment, said in a statement. “Our acquisition of Redbox will accelerate the scaling of our business as it combines complementary teams and services to create the streaming industry’s premier independent AVOD.”
“By joining forces, we will accelerate Redbox’s transition from a physical to high growth digital media company and be the only entertainment provider truly focused on value for consumers,” added Galen Smith, CEO of Redbox. “This deal provides Redbox stockholders with the opportunity to participate in the significant near- and long-term upside potential of a diversified and growing company with greater scale and resources.”
The combination is expected to be accretive to pre-tax earnings in 2023, with numerous opportunities to cross-sell each company’s customer base across digital properties, distribute Screen Media titles via Redbox kiosks and leverage tech and know-how to fully capitalize on Redbox’s AVOD opportunity. The company expects to deliver annual-run rate cost synergies in excess of $40 million in 2023. Chicken Soup for the Soul Entertainment expects that the combined company will exit 2022 with a run-rate exceeding $500 million of revenue and $100 million to $150 million of Adjusted EBITDA.
Under the terms of the agreement, which has been approved by the Boards of Directors of both companies, Redbox stockholders will receive a fixed exchange ratio of 0.087 of a share of class A common stock of Chicken Soup for the Soul Entertainment per Redbox share. Following the close of the transaction, Chicken Soup for the Soul Entertainment stockholders will own approximately 76.5% of the combined company, and Redbox stockholders will own approximately 23.5% of the combined company, on a fully diluted basis.
Redbox stockholders holding approximately 86% of the Redbox voting power have entered into a voting agreement to approve the transaction. Chicken Soup for the Soul Entertainment stockholders holding approximately 91% of the voting power of Chicken Soup for the Soul Entertainment have delivered a written consent approving the transaction.
The transaction is expected to close in the second half of 2022, subject to the receipt of required regulatory approvals and other customary closing conditions. Upon closing, the combined entity will retain the name Chicken Soup for the Soul Entertainment and will continue to trade under the ticker symbol “CSSE” on the Nasdaq stock exchange.