Retailer’s Chairman Steven Pepper Resigns Over Disagreement with Board’s Decision
Rent-A-Center Inc. (NASDAQ/NGS: RCII), one of the nation’s largest rent-to-own store operators, which announced early this week plans to consider options including a sale of the chain which operates approximately 2,500 stores now has an at least one proposal to consider.
Vintage Capital Management LLC, an Orlando-based private equity fund, made a nonbinding offer today to acquire all of the outstanding shares of the company for $13 per share in cash.
Investors don’t seem too excited about the offer. Rent-A-Center’s stock jumped onlu about $1 per share to about $10.90/share on news of the offer.
Rent-A-Center advised its stockholders not to take any action at this time but said it would review the offer.
[Editor’s Note: This story was updated Friday Nov. 3, 2017 at about 1:15 pm EST with news of the offer].
The Plano, TX-based company announced earlier this week that its chairman, Steven L. Pepper, resigned from his position effective immediately. Pepper informed the company that his resignation was a result of his disagreement with the board’s decision to initiate a strategic review process for the retailer.
Rent-A-Center will suspend its stock dividend payouts until it completes its review. The board’s decision follows calls from activist investors to put the company up for sale after reportedly declining buyout offers from a handful of private equity firms this year, including an $800 million offer from private equity firm Vintage Capital in June.
Engaged Capital, a Newport Beach investment firm with a stake in the company, commended the board’s decision calling it long overdue.
“Engaged Capital believes that Rent-A-Center remains an attractive acquisition opportunity. We believe the company’s strong cash flow generation, liquidity and leadership position in the attractive rent-to-own industry combine to underpin potential transaction price ranges that would allow both stockholders and a potential acquirer to realize significant value,” the company said.
Engaged Capital also claimed Rent-A-Center previously failed to pursue credible bids at meaningful premiums to its stock price earlier this year, adding, “Engaged Capital reminds the board that our analysis shows that a strategic acquirer could realize $300 million or more of synergies and operational improvements.”
The firm has engaged J.P. Morgan as its financial advisor and Winston & Strawn LLP as legal advisor. Rent-A-Center reported a loss this week the three months ended Sept. 30 of $12.6 million vs a $6.2 million profit for the same quarter last year.