Redbox 2010 Annual Report Download - page 68

NOTE 3: ACQUISITIONS
Redbox
In January 2008, we exercised our option to acquire a majority ownership interest in the voting equity of Redbox
and our ownership interest increased from 47.3% to 51.0%. Since our initial investment in Redbox, we had
accounted for our 47.3% ownership interest under the equity method in our consolidated financial statements.
Effective with the close of the transaction on January 18, 2008, we began consolidating Redbox’s financial
results into our consolidated financial statements.
On February 26, 2009, we closed the transaction (the “GAM Transaction”), whereby we agreed under a Purchase
and Sale Agreement (the “GAM Purchase Agreement”) with GetAMovie, Inc. (“GAM”) to acquire (i) GAM’s
44.4% voting interests (the “Interests”) in Redbox and (ii) GAM’s right, title and interest in a Term Promissory
Note dated May 3, 2007 made by Redbox in favor of GAM in the principal amount of $10.0 million (the “Note”),
in exchange for $10.0 million of cash and 1.5 million shares of our common stock with a value of
$27.7433 per share (and a total value of $41.6 million) based on the average of the volume weighted average
price per share for each of the eight NASDAQ trading days prior to, but not including, the date of issuance. The
remaining purchase price of $86.1 million plus interest of $2.3 million was paid in cash during the second and
third quarters of 2009.
In addition, also on February 26, 2009, we purchased the remaining outstanding interests of Redbox from
non-controlling interest and non-voting interest holders in Redbox under similar terms to those of the GAM
Purchase Agreement, issuing 146,039 unregistered shares of our common stock, 101,863 previously registered
shares of our common stock and $0.1 million in cash, totaling $6.9 million. The consideration paid in shares of
our common stock was valued in the same manner as the shares of common stock paid to GAM. The remaining
purchase price of $15.1 million plus interest of $0.4 million was paid in cash during the second and third quarters
of 2009.
The consideration totaled $162.4 million and included interest of $2.7 million. Of the total consideration,
$113.9 million was paid in cash and $48.5 million was paid in our common stock.
The purchase of the non-controlling interest in Redbox was a change of our ownership interest in a previously
consolidated subsidiary and was accounted for as an equity transaction. Accordingly, there was no gain or loss
recorded in our consolidated financial statements. The difference between the fair value of the total consideration
at closing and the carrying value of the non-controlling interest was recognized as a reduction to equity. This
difference of $112.5 million is being amortized over fifteen years for tax purposes, which resulted in tax benefits
of $43.8 million in the future years and offset the reduction to the equity attributable to Coinstar. In addition, we
made an Internal Revenue Service (“IRS”) code section 754 election resulting in an additional deferred tax
benefit of $11.9 million, which further offset the reduction in equity. As a result of recognizing these two tax
benefits, totaling $55.7 million, the net amount recorded as a reduction to our equity section was $56.8 million.
As of December 31, 2010 and 2009, the net difference was $56.3 million in the equity section of our
Consolidated Balance Sheets.
NOTE 4: DISCONTINUED OPERATIONS, SALE OF ASSETS AND ASSETS HELD FOR SALE
Money Transfer Business
On August 23, 2010, we agreed to sell our Money Transfer Business, including subsidiaries, consisting GroupEx
Financial Corporation, JRJ Express Inc. and Kimeco, LLC (collectively, “GroupEx”), acquired in 2008, to Sigue
Corporation (“Sigue”). The sale price was $18.0 million in cash and a seller’s note for $23.5 million, adjusted for
the amount by which the closing net working capital of the Money Transfer Business exceeds or falls below $9.0
million. In addition, Sigue will pay us an amount equal to the amount outstanding at closing under the revolving
credit arrangement between us and the Money Transfer Business. We expect the sale to close in 2011.
60