Chicken Soup for the Soul to Acquire Redbox for $375 Million

Streaming company Chicken Soup for the Soul Entertainment has initiated a $375 million acquisition of Redbox Entertainment, which operates roughly 38,000 DVD rental kiosks located in retail locations throughout the nation. The deal includes $50 million in Chicken Soup stock and assumption of Redbox’s $325 million in debt. Redbox has about 40 million customers enrolled in its loyalty program (Redbox Perks), offers more than 130 FAST digital channels on a Free Live TV platform, and has a content library that spans TVOD and PVOD platforms, in addition to physical and digital distribution channels.

“Chicken Soup for the Soul Entertainment has eight ad-supported video-on-demand and television streaming channels (Crackle, Popcornflix, Popcornflix Kids, Popcornflix Comedy, Truli, Frightpix, Espanolflix and Pivotshare), with 40 million monthly active users, specializing in lower budget offerings,” writes TechCrunch.

The companies say they see value in joining forces to gain share in an increasingly competitive streaming market. The deal gives Chicken Soup shareholders 76.5 percent of the company, with Redbox shareholders retaining 23.5 percent (of which Redbox majority shareholder Apollo Global Management has 15 percent).

Chicken Soup says the union will create “$500 million of revenue and $100 million to $150 million of adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) at the end of 2022,” when the transaction is expected to close, TechCrunch reports.

Redbox has struggled recently. Last year the company was report to have $140.8 million in losses and negative cash flow of $15 million. Its 2021 sales of $289 million paled in comparison with the $546.2 million tallied in 2020. Redbox went public in October 2021 after its physical DVD rental business took a severe hit during COVID-19. The public listing was part of a $693 million special purpose acquisition company (SPAC) merger with Seaport Global Acquisition Corp.

Launched in 1993 as a motivational publishing company, Chicken Soup for the Soul was in 2008 purchased by William Rouhana Jr., its chairman and CEO. In addition to building-out streaming services, Rouhana began dabbling in film and TV production. In 2021 Chicken Soup acquired indies Sonar Entertainment and 1091 Pictures as well as India’s Locomotive Global, creating a library of 24,000 TV episodes and 14,500 films.

Forbes reports that Rouhana “has been eying Redbox for almost two years,” despite its designation as a “dinosaur” in the digital age. “I’m buying the dinosaur because the dinosaur comes with cash flow and the dinosaur is gonna lay nice little dinosaur eggs called digital ad businesses with 40 million customers who already love the brand, with its TVOD (transactional video on demand) business and free TV business already in place,” said Rouhana.

Forbes writes that Rouhana feels the time is right for a Redbox turnaround “in part because movie production is back to pre-pandemic levels and theatrical movie releases are on the rise to the point where Wedbush Securities estimates that Redbox revenues will surpass $1 billion in 2023.”