By Lehar Maan
Oct 4 Activist investor Jana Partners LLC
reported a 13.5 percent stake in Outerwall Inc and said
it intends to explore options, including a possible sale, for
the operator of the Redbox video rental kiosks.
Outerwall's shares were up 9 percent in extended trading.
Jana, run by Barry Rosenstein, said in a regulatory filing
that it believed the stock was undervalued. The stake makes it
Outerwall's largest shareholder. ()
The hedge fund, which often pressure the companies it
invests in to change business strategies or sell themselves,
last month revealed a 6.2 percent stake in grocery chain Safeway
Earlier this year, Jana lost a battle to break up fertilizer
company Agrium Inc, when its entire slate failed to get
elected to the Canadian company's board.
Wedbush Securities analyst Michael Pachter suggested that
the firm could find more support among Outerwall shareholders.
"In the last couple of years, management has focused on a
lot of new ventures, such as movie and concert ticket sales and
gift cards without generating any meaningful revenue," Pachter
The Bellevue, Washington-based company, earlier known as
Coinstar, generates most of its revenue from the Redbox kiosk
business it acquired in 2008, which offers movie and videogame
discs for rental.
The company, which competes with the likes of Netflix Inc
and Comcast Corp, slashed its full-year
forecast in mid-September as average transaction size fell below
expectations on heavy discounting.
"Some investors believe that the company is wasting a lot of
money on new initiatives and would like them to spend more of
their effort generating cash and returning to the shareholders,"
Besides exploring a sale of Outerwall, Jana said it wants to
discuss selling certain of the company's businesses, ways to
return capital to investors, future strategies and the
composition of its management and board.
In a statement following the Jana disclosure, Outerwall said
it welcomed the opinion of its shareholders and was "open to
constructive input" that worked towards enhancing shareholder
Shares of the company closed at $57.10 on the Nasdaq on
Friday, off about 25 percent from the lifetime high they hit in
July of last year. They were trading at $62.29 after the bell.