Deciding to focus primarily on its bread-and-butter movie rental and coin-counting kiosks, Redbox parent company Coinstar has divested itself of its money transfer business. The business has been sold to Sigue Corp. for $41.5 million in cash and stock.
Coinstar CEO Paul Davis said the following about the divestiture:
“We believe that our global money transfer business should complement Sigue’s already extensive network of money transfer agents in the United States and Latin America . . . In addition, the sale of the money transfer business allows Coinstar to direct its full efforts toward our automated retail strategy.”
Wedbush Morgan analyst Michael Pachter applauds the sale:
“The divestiture allows management to focus on its core coin business and its fast-growing DVD business,”
Pachter believes that Redbox, Coinstar’s “fast-growing DVD business”, will bounce back in the third quarter after a relatively disappointing Q2. Said Pachter:
“We expect margins that were impacted by poor inventory management and negative leverage to reverse in [the third quarter], aided by the introduction of Blu-ray [Disc rentals] at a 50% price premium to standard-definition DVDs . . . Blu-ray should also help comps return to low double-digits.”
Its money transfer business comprised only about 8% of Coinstar’s total consolidated revenue last year. As the company narrows its focus to its core automated kiosk strategy, what can we expect from Coinstar in the coming months? With several potential kiosk ventures in the works, it will be interesting to see where Coinstar decides to go next.