Activist investor Glenn Welling and his Engaged Capital fund just got a boost in their effort to have rent-to-own retailer Rent-A-Center (RCII) consider strategic alternatives, such as a sale of the company.
That's because Influential investor advisory firm Institutional Shareholder Services over the weekend recommended that investors back two of the activist fund's three director nominations up for the company's seven-person board at an annual meeting and proxy battle set for June 8.
ISS, in a report obtained by TheStreet, backed up its decision by arguing that Rent-A-Center's board has taken a number of steps that appear far more "focused on undermining the dissident campaign than in bolstering shareholder confidence regarding the turnaround plan."
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. Welling 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 about 20% of Rent-A-Center's shares, about 16.9% for Welling and about 4.9% for McGuire. Welling's Engaged Capital owns a 20.5% economic stake, including shares and swaps. the activist fund had originally sought to nominate five directors to the company's board, but later cut back on the number of its nominations.
Nevertheless, investors, particularly large institutions, pay close attention to ISS recommendations. Some even vote automatically in lockstep with the suggestions. As a result it is very likely that Engaged Capital will succeed at installing a minority slate of directors onto the company's board.