Outerwall, aka Coinstar, Pays $350 Million for San Diego’s EcoATM

EcoATM, electronics recycling, mobile devices

Bellevue, WA-based Coinstar says today that it has agreed to pay $350 million in cash to acquire EcoATM, the San Diego cleantech startup that operates kiosks for recycling electronic mobile devices.

The automated retailer, which already was a major investor in EcoATM, with a 23 percent stake, also has changed its name Outerwall, along with its stock ticker (NASDAQ: [[ticker:OUTR]]). The buyer operates a network of coin cashing machines as well as kiosks for renting movies and video games.

In a statement today, Outerwall says the $350 million deal includes paying off certain indebtedness and transaction costs, subject to adjustment for working capital as of closing. In addition, Outerwall said it would deduct the value of its ownership stake in EcoATM from the deal. Once closed, though, Outerwall will own 100 percent of EcoATM, which will remain in San Diego.

EcoATM kiosk

Mark Bowles, an EcoATM co-founder, described how the startup was founded in a commentary for Xconomy in 2010. The startup began in 2008 with the idea of rewarding consumers to recycle their mobile phones by making it easy for them to get a “trade up” discount coupon, cash, gift card, or to make a charitable donation.

Today, EcoATM’s automated kiosks use advanced machine vision, electronic diagnostics and artificial intelligence to assess electronics. The company says it capitalizes on the growing U.S. mobile device market. While 175 million new devices are sold annually, only about 20 percent of used mobile phones get recycled. More than 50 percent are discarded or stored indefinitely, and the company has sought to broaden its market. In February, EcoATM raised $40 million in debt financing from Boston’s Falcon Investment Advisors to expand beyond its existing network of 300 kiosks in 20 states.

With the global demand for refurbished mobile phones accelerating, Outerwall CEO J. Scott Di Valerio said he anticipates growing demand for the kind of used mobile devices that EcoATM recycles. Outerwall said the deal would be accretive to its earnings in 2014, and would yield “a positive return on invested capital in the coming years.”

The transaction is expected to close by the end of September, subject to the receipt of regulatory approvals and other customary closing conditions.

Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.