COS COB, Conn.—Chicken Soup for the Soul Entertainment, Inc. has announced a deal to acquire Redbox Entertainment Inc. that would create a large AVOD player in the rapidly expanding connected TV ad space.
A recent IAB study found that ad spending on connected TV platforms increased 57% from 2020 to 2021 and is expected to increase another 39% this year.
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.
News of the deal comes as Redbox had faced financial difficulties. After going public last year in a SPAC merger with Seaport Global Acquisition, Redbox’s stock has plummeted and it has been forced to lay off 10% of its staff.
Following news of the deal, shares of both companies fell on the morning of May 12.
“Today marks a transformative moment for Chicken Soup for the Soul Entertainment and an inflection point for the ad-supported streaming industry,” said William J. Rouhana Jr., chairman and chief executive officer of Chicken Soup for the Soul Entertainment. “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 has 40 million customers in its loyalty program and high-potential digital television assets including carriage of over 130 FAST digital channels on its Free Live TV platform, as well as a robust TVOD and PVOD platform. Together, we will build a fully developed AVOD and FAST streaming business: proven branded streaming services, formidable content and production capabilities, and a strong AVOD and FAST ad sales operation.”
The combination of Chicken Soup for the Soul Entertainment and Redbox will create a leading independent, integrated direct-to-consumer media platform, with a massive content library, more than 38,000 kiosks nationwide, extensive digital capabilities in AVOD, TVOD, PVOD, and FAST, and access to millions of targeted customers, including nearly 40 million Redbox Perks members, the companies 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,” said Galen Smith, chief executive officer of Redbox. “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. With our footprint of more than 38,000 kiosks, diverse content libraries and combined streaming platforms, we will be well positioned to deliver consumers a wealth of high-quality entertainment options.”
The deal has been valued at about $375 million, mostly for the assumption of Redbox’s debt, or between $31 million and $36 million after the assumption of the debt, which is a huge decline from the SPAC deal that took Redbox public last fall.
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, the companies said. 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.
George Winslow is the senior content producer for TV Tech. He has written about the television, media and technology industries for nearly 30 years for such publications as Broadcasting & Cable, Multichannel News and TV Tech. Over the years, he has edited a number of magazines, including Multichannel News International and World Screen, and moderated panels at such major industry events as NAB and MIP TV. He has published two books and dozens of encyclopedia articles on such subjects as the media, New York City history and economics.
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