Coinstar Sells Gumball and Video Game Business

Coinstar Inc., the owner of the DVD vendor Redbox, said on Wednesday that it has closed the sale of its business of coin-operated gumball machines, children's rides, and video games.

Coinstar sold the business to National Entertainment Network Inc., a business created last month in Louisville, Colo., for the purpose of buying Coinstar's entertainment division. Coinstar said it received "nominal consideration" for the business and expects to record a pretax loss of $52 million to $57 million. It also expects a one-time tax benefit of $82 million to $87 million.

The company said it expects a net gain of $25 million to $35 million in its third quarter.

The company said the sale leaves it focused on self-service retail businesses, including its Redbox kiosks and coin exchange machines.

Coinstar also said it has begun a public offering of $175 million in convertible senior notes due in 2014. The notes are convertible into cash up to the principal amount, and into Coinstar shares if the notes are worth more than the principal. The underwriters will have an option to buy another $25 million worth of notes.

Coinstar said it would use the money to repay its term loan under a secured credit facility, and to pay down some of the money drawn on a $400 million line of credit.

Coinstar shares fell $1.07, or 3.4 percent, to $30.89 in late trading. They had risen 36 cents to close at $31.96 before the announcement.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.