DVD Rental Company Redbox Going Public Again In SPAC Merger: What Investors Should Know

Some investors might remember the DVD rental kiosk business Redbox as the unit of a publicly traded company during its successful early days. The company is coming back to the public markets in a SPAC merger.

The SPAC Deal: Redbox is going public in a merger with Seaport Global Acquisition Corp SGAM valuing the company at $693 million.

A PIPE of $50 million includes investments by media companies Screenvision, Thunder Road, Legendary Entertainment and Lions Gate Entertainment LGFA LGFB.

Apollo Global Management APO will remain the majority owner of Redbox.

Current Seaport Global Acquisition shareholders will own 25.8% of the new company.

About Redbox: With more than 40,000 kiosks and 150 retail partners, Redbox is the largest DVD rental kiosk company.

Redbox has 39 million loyalty members. The company has an email database of over 46 million customers and has seen 43 million customers download its app. Redbox also has 7 million followers across social media.

Over the last 18 years, customers have rented more than 6 billion DVDs from Redbox. Ninety percent of Americans live within five minutes of a Redbox kiosk.

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Redbox's Growth Projections: Redbox says the SPAC deal will help the company accelerate its technology development, content acquisitions and marketing initiatives.

The company launched Redbox Entertainment to bring exclusive and original content to viewers. The unit has launched 16 titles to date with 26 titles in development. Redbox's plans call for 36 exclusive titles to be released annually.

Redbox is seeking to transform from a legacy DVD business to a digital entertainment company, similar to the move that Netflix Inc NFLX made.

The company’s app allows some free movie rentals on demand and also allows customers to subscribe to premium television networks like Showtime. Redbox says it can partner with SVOD players. A test run saw over 62,000 Showtime bundles purchased.

Over 3 million customers have taken part in Redbox’s TVOD expansion. Multiproduct customers for Redbox have average revenue per users that are 5x traditional DVD rental customers.

Redbox's Financials: Redbox had revenue of $829 million in 2019. In 2020, the company had revenue of $546 million, with the pandemic being cited as a reason for the year-over-year decline. Guidance calls for revenue of $498 million in fiscal 2021 and $906 million in fiscal 2022.

The company is calling for digital revenue of $70 million in fiscal 2021 and $193 million in fiscal 2022.

Redbox had adjusted EBITDA of $114 million in fiscal 2020 and is guiding for adjusted EBITDA of $101 million in fiscal 2021.

SGAM Price Action: Shares of Seaport Global Acquisition Corp. were up 0.81% Monday at $9.95 Monday.