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Automated retail kiosk operator Outerwall ( OUTR ), parent company of Redbox and Coinstar, late Monday doubled its quarterly dividend and said its board is exploring “strategic and financial alternatives to maximize shareholder value.” Outerwall has been under pressure from investment firm Engaged Capital of Newport Beach, Calif., to take action to improve its value. On Feb. 18, Engaged Capital, which owns 14.6% of Outerwall’s shares, sent a letter with its recommendations to the company’s directors. Those recommendations included exploring a transaction to take the company private. Engaged also said Outerwall needs to better manage its cash and cut costs. It recommended discontinuing share repurchases, paying down debt and increasing its dividends. Further, it said Outerwall should shut down or sell its struggling ecoATM business, which buys and resells used smartphones and tablets. After the market close Monday, Outerwall issued a press release saying that it has retained Morgan Stanley as its financial advisor and Perkins Coie as its legal advisor in exploring alternatives for the Bellevue, Wash.-based company. Outerwall also raised its quarterly dividend to 60 cents a share from 30 cents a share. Outerwall stock jumped 9% in after-hours trading. In the regular session Monday, Outerwall stock rose a fraction, to 34.39. Shares have plunged nearly 60% since touching a record high in July. “The increase of our quarterly dividend to this sustainable level, and the decision to explore strategic and financial alternatives both clearly demonstrate that the Outerwall board of directors and management team are committed to acting in the best interests of the company and all shareholders,” Outerwall CEO Erik Prusch said in a statement. “The board and management team will evaluate all options thoughtfully and carefully with the support of our advisors. “Throughout the review process, Outerwall will remain focused on executing on our operational plans, managing our businesses for profitability and cash flow, and continuing to align costs with revenue to create operational efficiencies, while returning significant capital to our investors.” Challenging fundamentals for Outerwall could a roadblock to big strategic moves, Dougherty analyst Steven Frankel said in a research report Monday. He rates Outerwall stock neutral. “While we applaud management’s willingness to explore its strategic alternatives, we expect the process could be hamstrung by the material fundamental challenges that the company faces,” Frankel said. “Redbox continues to face stiff headwinds from box office volatility, the shift in consumer viewing toward episodic TV and the ubiquity of streaming, while ecoATM looks to us as a sub-scale business challenged by Apple ( AAPL ) and the carriers’ more aggressive push to repurchase old devices.” Redbox is being challenged by consumers opting more to use streaming services like Netflix ( NFLX ) and video-on-demand offerings from their pay-TV providers. RELATED: Redbox Faces Hit From Accelerating Shift To Streaming Video Scalper1 News
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