Redbox shares drop by 35% after the acquisition announcement

Redbox Entertainment Inc (NASDAQ: RDBX), a world-class entertainment company, executed a definitive merger agreement with Chicken Soup for the Soul Entertainment (NASDAQ: CSSE), one of the biggest operators of AVOD (advertising-supported video-on-demand) streaming services, whereby CSSE will acquire Redbox. 

The announcement saw Redbox shares drop by about 35%. The combination of these two companies will create a top integrated direct-to-consumer, independent media platform offering premium entertainment offerings for value-conscious customers. 

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Transaction details 

The combined corporation will be able to increase its scale across content distribution and production, with over 38,000 kiosks countrywide, a huge content library, extensive digital capabilities in PVOD, TVOD, and AVOD, as well as access to a massive number of targeted consumers, including almost forty million Redbox Perks members. 

Together, the new combined company will have access to arguably the best independent AVOD platforms in the industry. 

According to the merger agreement, which BoD approval from both companies, RedBox Entertainment Inc’s shareholders will get a fixed exchange ratio of about 0.087 CSSE Class A common stock shares per Redbox share. 

Following the deal’s completion, CSSE shareholders will own roughly 76.5% of the new combined corporation. On the other hand, Redbox shareholders will control the rest of the roughly 23.5%.

The agreement is expected to be complete by the beginning of the third quarter of the 2022 financial year, subject to the necessary customary closing conditions and regulatory approval. 

How does management feel

CSSE Chief Executive Officer and Chairman William Rouhana Jr. said:

Today marks a transformative moment for Chicken Soup for the Soul Entertainment and an inflection point for the ad-supported streaming industry… 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.

Redbox Chief Executive Officer, Galen Smith, said:

We believe that Chicken Soup for the Soul Entertainment is the ideal partner for Redbox. 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.