Jana Partners Acquires 13.5 Percent Stake In Outerwall

Jana Partners, the activist hedge fund headed by Barry Rosentein acquired 3,777,995 or 13.5% stake in Outerwall  (NASDAQ:OUTR), the parent company of Redbox video rental kiosk based on its 13D filing with the Securities and Exchange Commission (SEC).

In its filing, the activist hedge fund indicated that the shares of the Outerwall are “undervalued and represents an attractive investment opportunity.”

Jana Partners plans to discuss with the board and management of the company to review strategic alternatives such as exploring strategic transaction, selling or discontinuing certain businesses, or pursuing a sale.  In addition, Jana Partners also aims to improve the capital allocation policy, implement cost-cutting opportunities and changes to boost shareholder value.

Michael Pachter, analyst at Wedbush Securities believed that activist hedge fund might obtain the support of other Outerwall shareholders to carry out its objective. He noted that the company entered in many ventures such as selling movie and concert tickets as well as gift cards, but failed to generate meaningful revenues over the past two years.

The analyst said, “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 in generating cash and returning to the shareholders.”

In response to the regulatory filing of the activist hedge fund, the management of Outerwell said it “welcomes the opinions of its shareholders.” The company emphasized that it is “always open to constructive input” and committed to enhance shareholder value by continuing to take actions to achieve that objective.

“Our board of directors and management team regularly review the company’s strategic priorities and opportunities, including capital allocation, and assess a variety of strategic options,” stated Outerwall.

Jana Partners is now the largest stockholder of Outerwall, displacing Goldman Sachs Group (NYSE:GS) with 2,053, 723 or 7.32% stake in the company as of June 30, 2013.

The shares of Outerwall ended the trading session with a 9.43% gain at $57.10 a share on Friday. After hours, the stock was trading $62.15 per share, up by another 8.84%. Over the past 52-week range, the stock climbed from $40.50 to $65.60 per share.