Rent-A-Center Inc. (RCII - Get Report) on Wednesday, Nov. 8, rejected Vintage Capital's request for a 30-day exclusivity period for its $13-a-share acquisition offer of the rent-to-own company, a move that suggests other bidders are formulating acquisition plans.
"Given the early stage of the strategic review and the level of inbound interest from other parties, we do not believe it is in the best interests of our stockholders to enter into an exclusivity agreement with Vintage at this time," Rent-A-Center said in a letter to Vintage Capital.
The letter comes after Rent-A-Center said Oct. 31 that it had retained JPMorgan Securities LLC and 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.
Also, 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.
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.
A person familiar with the situation noted that another much larger rival rent-to-own company, Aarons Inc., (AAN - Get Report) is also still interested in acquiring Rent-A-Center and that an Aarons-Rent-A-Center combination would represent a huge competitive threat to Vintage's Buddy's, which is the smallest of the three rent-to-own retailers. He added that Vintage is likely still willing to pay more for an acquisition of Rent-A-Center, as evidenced by its July $15 a share offer. A deal could emerge as soon as February, he added.
Also, Rent-A-Center had previously received acquisition interest from buyout shops HIG Capital and Lone Star Funds, according to reports.
Rent-A-Center's shares traded mid-day Wednesday at $10.48 a share, well below Vintage's $13 a share offer. The low price may have something to do with the fact that there is a large short-seller presence in the stock. According to Bloomberg, RCII has a short interest as a percentage of its float of about 44.8%.
The Deal, a sister publication of TheStreet, had reported in April, citing sources, that Vintage Capital had already been interested in buying Rent-A-Center. Also, The Deal also reported at the time, citing sources, that Aarons was also interested as well.
Engaged Capital has a 20.5% economic stake in Rent-A-Center.
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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