Activist investor Glenn Welling just got a second consecutive boost in his 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 Glass Lewis on Thursday recommended that investors back two of the activist's three director nominations up for the company's seven-person board at an annual meeting and proxy battle set for June 8. The Glass Lewis report, which was obtained by TheStreet, comes after the other major proxy advisory firm, Institutional Shareholder Services, over the weekend, also recommended that investors back two of three dissident director candidates.
Investors, particularly large institutions, pay close attention to ISS and Glass Lewis recommendations. Some even vote automatically in lockstep with the ISS 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, which would likely push it towards considering a sale.
Overall both ISS and Glass Lewis raised concerns with the company. Glass Lewis said it suffers from "poor financial and operating performance" and "lagged all benchmarks over all periods" it reviewed.
And ISS, in a report obtained by The Deal, backed up its decision by arguing that Rent-A-Center's board has taken some steps that appear far more "focused on undermining the dissident campaign than in bolstering shareholder confidence regarding the turnaround plan."
Both ISS and Glass Lewis recommended that investors back Christopher Hetrick, director of research at Engaged Capital, Welling's fund. Glass Lewis said Hetrick "could provide additional oversight and ownership perspective" if elected and advocate for "the broader review of strategic alternatives Engaged Capital has requested." ISS said he brings "valuable experience analyzing consumer companies." The report noted that his interests would be aligned with the other shareholders because of Engaged Capital's big stake.