--Stock rises as much as 10% after dropping one-third in prior six weeks --Report says Coinstar held talks to sell itself --Shares also lifted by plan to repurchases shares By Joan E. Solsman Coinstar Inc.'s (CSTR) beaten-down stock rose as much as 10% Thursday on a report that it discussed selling itself to a private-equity firm as well as a separate disclosure that it planned to buy back shares. Noted for their volatility, shares of the kiosk operator recently gained 8.3% to $52.20. Through Wednesday's close, the stock had lost about one-third of its value since early July, when a slower growth rate at its key Redbox DVD-rental business spooked investors. On Thursday, the New York Post reported Coinstar, which also operates its namesake coin-counting machines, has been exploring the possibility of selling itself to an undisclosed private-equity firm for several months, citing unnamed sources. The paper said the Bellevue, Wash., company's acquisition "talks are heating up" while it also navigates a vending-machine expansion ranging from coffee to photo printing. Coinstar spokeswoman Marci Maule said the company doesn't comment on speculation. Chief Executive Paul Davis, speaking at a conference in Boston, reiterated the company wouldn't comment on other people's stories. "That was the first thing I heard, in our first meeting this morning, about that article. We have no idea where it came from," he said. Separately Thursday, Coinstar disclosed in a filing to the Securities and Exchange Commission that it has entered a trading plan to repurchase common stock over the next six months. In addition, Coinstar still has an authorization from its board in July 2011 to buy back up to $270 million worth of shares. The company has largely sat on the sidelines for share repurchases over the last year after settling an accelerated program in the first half of 2011. Analysts' opinions varied about the potential for a private-equity purchase of some or all of Coinstar. B. Riley analyst Eric Wold said he wasn't surprised by private-equity interest, pointing to Coinstar's "extremely low" stock valuation, significant free cash flow and coming expansion into new segments. Coinstar also dominates in both segments it currently operates, he added. "Although the bears continue to await the demise of the DVD-rental industry...we continue to believe that Redbox is now dominating a rental segment that will see consumer demand for many years to come," he said. Coinstar derives most of its revenue and nearly all its growth from its Redbox DVD-rental kiosks. But the market for physical DVD rentals is widely believed to be on an irreversible descent as consumers turn to online options, and investors are sensitive to any signs that Redbox has peaked. The company last month reported its second-quarter earnings jumped 38% as DVD-rental revenue again climbed, albeit at a slower rate. It also has formed a joint venture with Verizon Communications Inc. (VZ) to launch a streaming-video service later this year. Pacific Crest analyst Andy Hargreaves also noted the attraction of new ventures Coinstar is developing, such as a coffee-vending machine and a consumer-electronics dispenser. At the right price, a private-equity buyer may feel it is "getting those businesses for free," he said. However, he said market perception that Redbox's physical DVD-rental model faces an inevitable decline could hinder private-equity interest. A typical private-equity model has an exit strategy of returning a company to the public market after either breaking it up or improving it. "The potential issue is that the primary value of the business is Redbox, which if you kept in-house or private for a couple years, it would be extremely difficult to bring back to market because their model would be in decline," Mr. Hargreaves said. Write to Joan E. Solsman at joan.solsman@dowjones.com Subscribe to WSJ: http://online.wsj.com?mod=djnwires
