Outerwall, the parent of DVD-rental kiosk operator Redbox, said that its board has initiated a process to explore strategic and financial alternatives aimed t boosting shareholder value.
The decision comes about a month after activist investor firm Engaged Capital urged the company to go private soon after amassing a 14.6% stake in Outerwall.
Outerwall said it has retained Morgan Stanley & Co. as its financial advisor, and Perkins Coie LLP as its legal advisor to assist in the process.
Update: Shares in Outerwall rose $3.61 (10.5%) to $38.00 each in after-hours trading Monday (as of 7:42 p.m. ET).
The Outerwall board also announced it has declared an increase in the quarterly dividend payable to its shareholders to $0.60 per share, from $0.30 per share. That dividend is expected to be paid on June 21, 2016 to shareholders of record at the close of business on June 7, 2016.
"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," said Erik E. Prusch, Outerwall's CEO, 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."
The company also said there’s no assurance that the exploration will result in any particular action or transaction, and that it will not discuss or disclose developments in this area until the board has approved a definitive course of action or the process is otherwise concluded.
Last month, Outerwall posted Q4 revenues of $527.2 million, a decrease of 11.8%, while its Redbox unit pulled in $407 million, down from $490.7 million in the year-ago quarter, reflecting a 24.3% decline in movie rentals year-on-year. For Q4, Redbox generated 135.8 million rentals, down from 179.5 million, attributing the drop to an accelerated secular decline in the physical DVD market, high frequency renters returning more slowly to their normal rental patterns, and fewer titles available to rent in the period.
In 2013, Redbox and Verizon launched a service called Redbox Instant by Verizon that provided subscribers with access to a streaming library, plus the option to obtain credits toward DVD/Blu-ray discs that are available at Redbox kiosks. The J.V. shut down the service in October 2014 after it struggled to acquire subscribers.