Outerwall Moves to Return Cash After Jana Arrives
By David Benoit
MoneyBeat
Wall Street Journal
5:59 pm, Oct 25, 2013
Outerwall Inc., the company formerly known as Coinstar, is giving shareholders back the change.
Bloomberg News
Three weeks after activist investor Jana Partners LLC revealed it had taken a 13.5% stake in the company and was pushing to boost shareholder returns, Outerwall sped up a plan to hand the majority of its cash flow over to shareholders.
While announcing results that met a lowered guidance, Outerwall pledged to begin returning 75% to 100% of its free cash flow to shareholders.
As part of that plan, the company still intends to buy back $100 million in shares in the fourth quarter, and will now buyback $50 million “early” in the first quarter. Analysts now estimate the company will buy back around $200 million in stock for 2014, slightly more than the $195 million now expected in 2013.
“We believe now is the appropriate time to increase capital return to shareholders,” CFO Galen Smith said on a conference call.
Outerwall announced its capital review in September, before Jana filed its position, but the hedge fund put additional pressure to speed up the plan, people familiar with the matter said Friday.
Jana also was expected to raise the prospects of a strategic review of the various parts of Outerwall, including a possible sale, according to a filing. The hedge fund feels Thursday’s announcement of returning more cash flow is a positive first step, a person familiar with the matter said. Jana will, however, continue to watch the review, the person added.
Analysts also applauded the move and the stock hit a 52-week high, though the rally faded as Friday wore on.
“The company’s tone around new initiatives and return of FCF to shareholders is changing in a positive way,” Piper Jaffray said. “We expect investors will welcome these changes, which suggest Outerwall is focusing on maximizing cash flow from what continue to be solid business segments (Redbox & Coin) and limit investment to one or two new initiatives (ecoATM, etc).”
The stock closed up 4.3% at $64.62 Friday, after rising as much as 10%. The stock is up 30% since the day before Jana’s position was first reported in The Wall Street Journal.
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