Jana Partners takes large stake in Redbox operator Outerwall
Activist investor Jana Partners reported a 13.5 percent stake in Outerwall 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, 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 said.
The Bellevue, Wash.-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 and Comcast, slashed its full-year forecast in mid-September as average transaction size fell below expectations on heavy discounting. (Disclosure: Comcast is the owner of NBCUniversal, the parent company of CNBC and CNBC.com.)
"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," Pachter said.
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 value.
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.