Reuters: Global Markets: Coinstar rises on report of possible sale, analysts skeptical

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Coinstar rises on report of possible sale, analysts skeptical Aug 16th 2012, 17:16 By Sruthi Ramakrishnan Thu Aug 16, 2012 1:16pm EDT (Reuters) - Shares of Coinstar Inc (CSTR.O) rose as much as 10 percent after the New York Post reported that the operator of Redbox video rental kiosks was looking to sell itself, but analysts are skeptical about the possibility of a deal. Coinstar has been in discussions with an undisclosed private equity firm for several months and the talks are heating up, the newspaper reported, quoting unnamed sources. When contacted, Coinstar said it does not comment on rumors or speculation. Analysts said they were unaware of any talks and the company's stock is moving on unfounded rumors. "If I haven't heard it, it hasn't happened," said Wedbush Securities analyst Michael Pachter, who is rated five-stars for the accuracy of his earnings estimates on Coinstar, according to Thomson Reuters StarMine data. Coinstar, which initially used to operate coin-vending machines, later acquired DVD rental company Redbox. Redbox offers self-service movie rentals at over 30,000 kiosks across the United States and accounted for about 90 percent of Coinstar's revenue. Analysts believe the company has too many growth drivers ahead to consider a sale at this stage. "We continue to believe that Redbox is now dominating a rental segment that will see consumer demand for many years to come," B. Riley & Co analyst Eric Wold said. If the company is looking to sell something to a private equity group, it might just be the coin-counting business, Wold said. Coinstar also formed a joint venture with Verizon Communications Inc (VZ.N) earlier this year to sell video services that compete with those of Netflix Inc (NFLX.O). The venture will combine the Redbox DVD rental kiosk business with an Internet video offering from Verizon, including mobile services, in the second half of the year. Although, the company forecast full-year revenue largely below estimates last month on rollout delays in Canada, it dominates the DVD rental business and generates a significant level of free cash flow, analysts said. However, the capacity to generate steady cash coupled with low investment needs might attract a potential suitor. "The company is nearly at a point where it does not have to invest as much in deploying kiosks, so the cash flow is very positive for private equity," First Analysis Corp analyst Larry Berlin said. Coinstar, which had a market value of $1.51 billion at Wednesday close, has lost about 14 percent of its stock value in the last six months. The company said on Monday Chief Operating Officer Gregg Kaplan, who founded Redbox in 2002, will be leaving next year. Coinstar's shares gave up some of their gains from the morning and were up 6 percent at $51.30 in afternoon trade on the Nasdaq on Thursday. The stock touched an intra-day high of $53.21. (Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Sreejiraj Eluvangal) Link this Share this Digg this Email Reprints

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