BELLEVUE, WA - Coinstar announced on May 24 a definitive agreement to purchase American Coin Merchandising Inc. and its parent company, ACMI Holdings Inc., for $235 million in cash.
Coinstar owns and operates a nationwide route of 11,000 coin-counting machines, e-payment kiosks and prepaid phone card venders with some 25,000 U.S. locations. ACMI, operating as SugarLoaf Creations (Louisville, CO), owns and operates more than 167,000 machines, including cranes, bulk venders, kiddie rides and video games in more than 18,000 U.S. locations. ACMI is also owner of Folz Vending (Oceanside, NY), one of the nation's leading bulk vending operations. Combined, Coinstar and ACMI will have over 40,000 distribution points.
The transaction will be funded with new debt and is subject to government approvals and financing availability. The deal is expected to close in the third quarter of this year. Coinstar will not assume any of ACMI's existing debt.
Coinstar president Rich Stillman told VT: "At the start we plan on running the two companies as independent organizations and have not planned any layoffs or staff reductions."
Stillman praised ACMI's "superb management team" under CEO Randy Fagundo. Coinstar CEO Dave Cole will remain in that post; Fagundo will continue to lead the amusement and vending division, reporting to Cole.
Folz Vending, now operated as a wholly owned subsidiary of ACMI, may or may not be integrated into the Coinstar-ACMI structure at some point, Stillman said. "The actual structure remains to be seen," he told VT. "The transaction is not yet closed, so that's speculation on my part. We will be thoughtful about it and will make the right decision for ourselves and our partners."
Cole said the acquisition "will allow us to penetrate new classes of trade and provide retailers with a single source for a range of front-end consumer services." Executives from both companies said the other's established retail relationships would enable them to cross-sell products into a broadened customer base.
"One of the reasons we thought this was such a great combination," explained Stillman, "was that we see terrific opportunities for cross-selling. We're very strong in the grocery channel. ACMI has some presence there but many more grocery stores would be suitable for their equipment. Conversely, Coinstar has not only coin-counting kiosks, but also the e-pay kiosk that would be excellent candidates for several channels where ACMI has a significant presence such as restaurants, mass merchants, truck stops and hospitality venues like bowling centers."
Stillman also stressed that the merged companies could offer a "one-stop solution" for front-end machine services to a broad class of locations. And, he said, the combined organization "will have greater access to capital and therefore, as we find opportunities to grow the installed base of ACMI with whatever type of device, we would certainly have the financial strength to afford a more rapid pace of growth than either would have on their own."
A technologically advanced network connects all Coinstar equipment to phone lines in 11,000 locations. A computer inside each machine counts every coin processed, diagnoses any technical issues and uploads all this data to Coinstar headquarters once every 24 hours. A field service and branch management team of 220 Coinstar employees receives a report each morning from the network, detailing activities and service issues (if any) pertinent to the machines in their zone. The data network has helped Coinstar achieve a 99% operational record for its equipment, it reports.
Randy Fagundo said ACMI's amusement equipment would benefit from this network. According to Stillman, discussions about networking ACMI's machines are speculative at this early stage. But he added: "It's not far-fetched to imagine that there could be linkage between ACMI and Coinstar equipment located in the same site, or some additional intelligence from ACMI machines that might connect to our network. There would be effort involved but we have been at this for over a decade and we understand the technology. We are capable of building that [technology] into each machine if it makes business sense to do so."
Both Coinstar and ACMI are less than 25-years old; each has been busy with a series of acquisitions and expansion during the past 18 months. Coinstar, founded in 1991, installed its first machines in four San Francisco Bay area supermarkets in 1992. Today its workforce of 425 is responsible for an extensive multinational network with more than 10,000 supermarket-based machines in 48 states and the District of Columbia, as well as Canada and the United Kingdom.
In October 2003, Coinstar expanded into e-payments and prepaid card vending with the self-service "Top-Up" kiosk, which was located mainly in convenience stores, and offered popular prepaid services including bill payment, mobile phone content, a prepaid cash card, prepaid wireless airtime and prepaid long distance. On March 15, 2004, Coinstar acquired one of the nation's largest distributors of prepaid products, CellCards of Illinois LLC, which had been majority owned subsidiary of American Payment Systems. CellCards chiefly serves 13,000 national drug store chain locations. For the quarter ending March 31, 2004, Coinstar reported revenues of $43.1 million and 16.1% same-store sales growth.
ACMI was originally founded in 1987 in Boulder, CO, where it was headquartered until February of last year when it relocated to Louisville, CO. ACMI has approximately 1,100 employees and operates in all 50 states and Puerto Rico. It has 37 offices around the country and a third-party operated production/distribution plant in Shanghai, China. Locations include Wal-Mart and other mass retail chains, supermarkets, warehouse clubs, restaurants, entertainment centers and truck stops. In 2002, Wellspring Capital purchased ACMI, making it a private company. That same year, ACMI purchased the Rainbow Crane manufacturing company, the Kiddie World ride manufacturing concern, and the NCE kiddie ride operation. In March 2003 ACMI acquired Folz Vending, the nation's leading bulk vending company with revenues of over $50 million annually from more than 140,000 bulk vending machines. ACMI also acquired the Gameplan operating company last year. ACMI's revenue for the last 12 months ended March 31, 2004 was approximately $220 million. As of March 31, 2004, ACMI employed approximately 1,150 people.