Rent-A-Center (RCII) - Get Report shares spiked in pre-market trading Friday after buyout shop Vintage Capital offered to acquire the rent-to-own company for $13 a share, in a move that comes after the activist-targeted business announced earlier this week it was considering strategic alternatives such as a sale.
"We have followed the RAC story, and your impact on the Rent-to-Own industry, for over 20 years and we are pleased to be a significant shareholder," Vintage Capital said in a letter to Rent-A-Center CEO Mark Speese.
The company's shares spiked by 6% to $9.92 a share after the bid was announced in an activist securities filing Friday. Vintage Capital, which is the majority owner of a smaller rent-to-own competitor, Buddy's Home Furnishings, had been interested in buying Rent-A-Center for some time. In July Vintage offered to buy Rent-A-Center for $15 a share or $800 million but the company rejected the offer.
However, the private equity firm, which accumulated a 6% Rent-A-Center stake, believes that the Plano-Texas-based company may be more amenable to a sale now after its announced Monday, Oct. 31 that it was launching a process to explore strategic alternatives, a move that came five months after activist Glenn Welling and his fund, Engaged Capital LLC, succeeded at installing a minority-slate of three dissident director candidates to the company's board.
In addition, in a key coup for Welling, the rent-to-own company's chairman, Steven Pepper, also on Oct. 31 resigned from his position. Pepper had been under pressure from Welling for months. Most recently, in June, Welling lashed out at Pepper over his use of the company's private jet even as the company continued to struggle.
On Monday, Rent-A-Center reported a loss of $0.15 a share for the third quarter, far short of a FactSet consensus estimate analysts of a loss of $0.03 a share.
The Plano, Texas-based company said it hired J.P. Morgan as a financial adviser and Winston & Strawn LLP as a legal adviser. The strategic review also comes after Rent-A-Center had previously received acquisition interest from buyout shops HIG Capital and Lone Star Funds, according to reports.
The Deal had reported in April, citing sources, that Vintage Capital had already been interested in buying Rent-A-Center. Also, The Deal also reported, citing sources, that another rent-to-own operator, Aarons Inc. (AAN) - Get Report was also interested.
Engaged Capital has a 20.5% economic stake in Rent-A-Center.
Shareholders in June voted to elect three Engaged Capital-backed dissident director candidates to Rent-A-Center's board, giving Welling a minority slate on a seven-person board. One shareholder advisory firm had previously suggested that dissident director Jeffrey Brown, nominated by Welling, has "finance and transnational experience that could likely be of value to the board as it considers opportunities to maximize shareholder value."
Also, Welling has had success at driving M&A at companies Engaged targets in the past. Boulder Brands, which makes Earth Balance and Evol Foods, was sold to Pinnacle Foods in 2015 shortly after Engaged became involved. Engaged has been successful at driving the recent sale of Redbox kiosk maker Outerwall Inc.'s sale to Apollo Global Management for $1.6 billion and medical device maker HeartWare International Inc. purchase by Medtronic plc for $1.1 billion.
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