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Chicken Soup for the Soul Entertainment, Inc. (Nasdaq: CSSE), one of the largest operators of ad-supported video-on-demand (AVOD) streaming services, and Redbox Entertainment Inc. (Nasdaq: RDBX), a leading entertainment company, have entered into a definitive agreement under which Chicken Soup for the Soul Entertainment will acquire Redbox.
The combination of Chicken Soup for the Soul Entertainment and Redbox will create an independent, integrated direct-to-consumer media platform delivering premium entertainment for value-conscious consumers. The combined company will have increased scale in content production and distribution, with a massive content library, more than 38,000 kiosks nationwide, expanded digital capabilities in AVOD, TVOD, PVOD and FAST, and access to millions of targeted customers, including nearly 40 million Redbox Perks Members.
Together, the combined companies will have the industry’s leading independent AVOD platforms, one of the fastest growing segments in the entire entertainment industry. According to a recent IAB study, ad spend on connected TV platforms increased by 57% between 2020 and 2021 and is expected to grow another 39% this year.
“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., President and CEO of Chicken Soup. for the Soul Entertainment. “Our acquisition of Redbox will accelerate the scale of our business as it combines complementary teams and services to create the streaming industry’s first independent AVOD. Redbox has 40 million customers in its loyalty program and high-potential digital TV assets, including the distribution of more than 130 FAST digital channels on its Free Live TV platform, as well as a TVOD and PVOD platform robust. 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. »
“We believe Chicken Soup for the Soul Entertainment is the perfect partner for Redbox. By joining forces, we will accelerate Redbox’s transition from a physical media company to a high-growth digital media company and be the only truly value-driven entertainment provider for consumers,” said Galen Smith, CEO from Redbox. “This all-stock transaction offers Redbox shareholders the opportunity to participate in the significant near- and long-term upside potential of a diverse, growing company with greater scale and resources. With our footprint of more of 38,000 kiosks, diverse content libraries and streaming platforms combined, we will be well positioned to provide consumers with a wealth of high-quality entertainment options.
Rouhana continued, “More and more viewers are embracing ad-supported streaming offerings in a content environment characterized by cord cutting and saturation of high-priced subscription services. In the short term, these conditions are even more acute in a macroeconomic environment of rising inflation and economic uncertainty. With the combination of an extensive content library, AVOD and FAST digital channel capabilities, and an expanding global audience, we believe we will be able to deliver more exciting premium entertainment to millions of conscious viewers. value and drive growth and value creation for our shareholders”.
The combination is expected to be accretive to Adjusted EBITDA in 2023, with ample opportunities to cross-sell each company’s customer base on digital properties, distribute Screen Media titles through Redbox kiosks, and leverage technology and know-how to take full advantage of Redbox’s AVOD opportunity. The company expects to generate annual cost synergies exceeding $40 million in 2023. Chicken Soup for the Soul Entertainment expects the combined company to exit 2022 with a run rate exceeding $500 million in revenue and $100-150 million in adjusted revenue. EBITDA.
Under the terms of the agreement, which has been approved by the boards of directors of both companies, Redbox shareholders will receive a fixed exchange ratio of 0.087 of a Class A common stock of Chicken Soup for the Soul Entertainment per Redbox share. Following the closing of the transaction, Chicken Soup for the Soul Entertainment shareholders will own approximately 76.5% of the combined company, and Redbox shareholders will own approximately 23.5% of the combined company, on a fully diluted basis.
Calendar and approvals
Redbox shareholders holding approximately 86% of Redbox’s voting rights have entered into a voting agreement to approve the transaction. Chicken Soup for the Soul Entertainment shareholders holding approximately 91% of the voting rights of Chicken Soup for the Soul Entertainment have issued a written consent approving the transaction.
The transaction is expected to close in the second half of 2022, subject to receipt of required regulatory approvals and other customary closing conditions. Upon closing, the combined entity will retain the name Chicken Soup for the Soul Entertainment and will continue to trade under the symbol “CSSE” on the Nasdaq stock exchange.
Guggenheim Securities, LLC is the financial advisor to Chicken Soup for the Soul Entertainment and Brian Ross of Graubard Miller is the legal advisor to Chicken Soup for the Soul Entertainment. PJT Partners and Kroll, LLC act as financial advisors to Redbox. Weil, Gotshal & Manges LLP is legal counsel to Redbox.
Management of Chicken Soup for the Soul Entertainment and Redbox will host a conference call with investors today, May 11, 2022, at 8:30 a.m. ET, to discuss the proposed transaction as well as the results of Chicken Soup for the Soul Entertainment for its first trimester. ended March 31, 2022. For interested investors who wish to participate, the national toll-free number is (888) 428-7458 and the international toll-free number is (862) 298-0702. Once connected with the operator, request access to the chicken soup for Soul’s first quarter 2022 earnings conference call.
A webcast of the call will also be available in the events section of the Chicken Soup for the Soul Entertainment Investor Relations website: https://ir.cssentertainment.com/.
A presentation to investors with more detailed information regarding the proposed transaction will be provided by Chicken Soup for the Soul Entertainment with the SEC under cover of a Current Report on Form 8-K, which may be viewed on the SEC’s website: www.sec.gov. This presentation will also be available on the Chicken Soup for the Soul Investor Relations site: https://ir.cssentertainment.com/.