Rent-A-Center (RCII) on Tuesday reported that it had recently rejected an $800 million bid from Vintage Capital Management LLC, arguing that the offer significantly undervalued the rent-to-own company and was opportunistic and inadequate.
The company's shares shot up as much as 17% in pre-market trading on expectations that a sale could happen soon but dropped back down slightly after Rent-a-Center disclosed in a securities filing that it had rejected Vintage's offer.
Rent-A-Center closed up 99 cents, or 8.9%, to $12.09 per share. The Vintage bid valued the company at $15 per share.
The move comes after Rent-a-Center shareholders last month voted to elect three dissident director candidates, giving an activist investor at the gate, Engaged Capital LLC's Glenn Welling, a boost. Welling had been pushing to have the rent-to-own company conduct a review and potentially sell the business.
The Deal had reported in April, citing people familiar with the situation, that 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. Also, The Deal reported that another rent-to-own operator, Aarons Inc. (AAN) was also interested.
However, Welling's victory didn't necessarily mean that Engaged would be able to push through a deal quickly. His director candidates did not take control of the board - they only secured a minority of three dissidents on the company's seven-person board. Also, Welling recently noted that Rent-a-Center's board chairman Steven Pepper said that he would take a two-month vacation and would be unavailable until August. The move suggested a stalling tactic and one that indicates that a sale wasn't imminent.