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Two high-profile activist investors are pressing rent-to-own retailer Rent-A-Center(RCII) - Get Report to launch a strategic review and consider selling the business.

But experts caution that some of the most likely and interested buyers would face antitrust or political risks if they sought to acquire Rent-A-Center, which rents furniture and appliances to customers who then get a chance to finance their purchase.

At issue is a director-election proxy contest launched by activist investor Glenn Welling and his Engaged Capital LLC. The activist fund has been pushing for Rent-A-Center to consider all strategic alternatives, including a sale of the entire company, as its stock has been declining for several years. He was recently joined by another well-known activist, Marcato Capital Management's Mick McGuire, who also wants to see Rent-A-Center sold. Together, Engaged and Marcato own more than a quarter of the company's shares, 20.5% for Welling and about 4.9% for McGuire. With other shareholders privately expressing concern about Rent-A-Center's prospects, expect their effort to succeed either in the form of a settlement or a contest that goes the distance.

That means strategic M&A could be on the horizon. There are at least two U.S.-based strategic buyers interested in Rent-A-Center--rival rent-to-own operator, Aarons(AAN) - Get Report and private equity firm Vintage Capital Management, a majority owner of a smaller rent-to-own competitor, Buddy's Home Furnishings, according to people familiar with the situation.

In addition, a person familiar with the situation suggested that Grupo Elektra SA de CV, a Mexico City-based retailer that is a large U.S. nonbank provider of cash advance services, could express an interest as well. Lastly, Marcato noted in a letter released earlier this week that other "private market participants" could be interested as well.

Nevertheless, antitrust experts argue that a combination of Aarons and Rent-A-Center or one that puts Vintage and Buddy's together with the rent-to-own company could face significant hurdles, because the three companies control the vast majority of the U.S. rent-to-own market. They contend that rent-to-own is a unique market, and separate from other furniture and appliance stores as well as financing options.

Dianna Moss, president of the American Antitrust Institute in Washington, suggests that either combination would raise antitrust concerns because it would result in the disappearance of a head-to-head competitor and reduce the market from three rivals to two. "You are looking at a highly concentrated market," Moss said.

Moss argues that Rent-A-Center, Aaron's and Buddy's all cater to a sector of the population that does not have access to other types of financing. "Markets are defined under merger guidelines from the perspective of the consumer," she said. "Would a consumer that goes to Buddy's or Rent-A-Center find Ashley Furniture as an alternative for financing? The answer often is No."

However, there are at least a few reasons to believe such a combination could pass muster. For one thing, all three companies have believed a three-to-two deal is possible--at least they believed so in the recent past. Consider that Vintage had sought to acquire Aaron's in a 2014 $2.3 billion hostile bid. That effort was quashed after Aaron's acquired Progressive Finance Holdings, a virtual rent-to-own business, for $700 million in a poison pill acquisition. Vintage still owns a 10% Aaron's stake, according to FactSet Research.

In addition, in 2015, Rent-A-Center, with a much larger market capitalization at the time, reportedly sought several times to acquire Aaron's, but was rebuffed. The effort suggests that it didn't believe there were antitrust concerns at the time. 

And Aaron's CEO, John Robinson, told shareholders in a March letter to shareholders that he expects to grow partly through strategic acquisitions, which is why the company has "ample financial flexibility to execute" its strategic priorities. This suggests that Aaron's not only is interested in buying Rent-A-Center but believes an acquisition of Rent-A-Center could pass regulatory muster. Aaron's declined to comment. 

In addition, Aaron's notes in its annual report that itself and Rent-A-Center, the two largest U.S. rent-to-own companies, control about 4,700 of the 9,200 rent-to-own stores in the U.S., Canada and Mexico. The financial statement also posits that Aaron's competes with other national, regional and local operators of rent-to-own stores, as well as virtual lease-to-own businesses as well as traditional and e-commerce retailers, plus other consumer finance companies that enable its customers to shop at traditional or online retailers. Aaron's also argues that it competes with retail stores that enable customers to buy merchandise for cash or credit. 

In addition, the Trump administration represents a bit of a wild card when it comes to transactions.

To be sure, a Grupo Elektra-Rent-A-Center combination would likely face fewer traditional antitrust obstacles, though it acquired payday lender Advance America, Cash Advance Centers in 2012. Nevertheless, a Grupo Elektra acquisition raises other political risks, considering the Trump Administration's drive to keep jobs in the U.S. and build a wall between Mexico and the U.S. A Grupo Elektra spokesman declined to comment. 

"On the one hand Rent-A-Center might be more likely to look at Grupo Elektra because it has less antitrust risk, but they also have to wonder about the political risk. Would they stop the Mexican acquisition because of Trump?" asks Mark Cooper, director of research at the Consumer Federation of America.

Cooper suggests that an Aaron's-Rent-A-Center deal would likely face a second request for information from the Justice Department, adding that the review would create a debate over geographic overlap. However, he argued that Aaron's, Rent-A-Center and Buddy's compete in a unique market, adding that regulators won't allow a combination of the No. 1 and No. 2 companies in a particular market. "[They] can't say that banks compete with us because these are people who can't afford bank loans," Cooper said.

Even if such a deal were approved, there could be significant remedies required in the form of divestitures that could have issues because they are more than what the acquirer is willing to accept or problematic because of a lack of viable buyers.

"There are going to be deals that even the most permissive enforcement teams would reject because they will eliminate head-to-head competitors," Moss said. "This could be a good test case for regulators."

Editors' pick: Originally published April 13.