Shares of movie-rental business Redbox Entertainment Inc. were falling Wednesday after the company reached an agreement to be acquired by Chicken Soup for the Soul Entertainment Inc. in an all-stock deal that implies a Redbox valuation below $1 a share.
Through the terms of the transaction, Redbox shareholders would get 0.087 shares of video-content company Chicken Soup for the Soul Entertainment for each Redbox share that they own. The arrangement has been approved by both companies’ boards of directors.
Redbox shares had been red hot in recent weeks, nearly tripling from their April low through Tuesday’s close, to finish that session at $5.60, though they were still trading well below their price as of the time of Redbox’s public debut through a special-purpose acquisition company (SPAC) merger last fall.
But the stock was falling more than 8% in Wednesday’s session, to a recent $5.15, following the deal announcement. They had been down as much as 50% earlier in the session. Shares of Chicken Soup for The Soul were up 4.6% in Wednesday trading to $8.28.
At current prices, the agreed on share-exchange ratio would value Redbox shares at 72 cents each.
Redbox Chief Executive Galen Smith framed the terms of the arrangement positively. “This all-stock transaction 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,” he said in a release.
In Smith’s view, Chicken Soup for the Soul “is the ideal partner for Redbox” and the combination “will accelerate Redbox’s transition from a physical to high growth digital media company.”
“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,” Chicken Soup for the Soul Chief Executive William Rouhana said in the release, referring to ad-based video on-demand services.
Chicken Soup for the Soul Entertainment runs streaming platforms including Crackle, which lets people watch programming with advertising.
Rouhana also pointed to opportunities stemming from Redbox’s 40 million loyalty members.
Chicken Soup for the Soul Entertainment shareholders will own about 76.5% of the combined company after the deal closes, while Redbox stockholders will own roughly 23.5%. The deal is expected to close in the second half of the year.