Rent-A-Center, Inc. (RCII - Free Report) has finally been convinced by Vintage Rodeo Parent, LLC (Vintage) that its offer is in best interests of the stockholders of the former. Vintage — an affiliate of Vintage Capital Management, LLC (Vintage Capital) — will buy the company’s outstanding shares for $15.00 per share in cash, denoting a premium of nearly 49% over the closing price on Oct 30, 2017. The transaction, which is expected to be concluded by the end of this year, is valued at approximately $1.365 billion, including net debt.
Rent-A-Center, which went public on the NASDAQ stock market in 1995, will become a privately-held company, following the completion of the deal. The company will be merged with Buddy’s Home Furnishings, where Vintage Capital has a controlling stake. Notably, Buddy’s Home Furnishings is a rent-to-own concept for furniture.
The Plano, TX-based company has entered into a merger agreement with Vintage — an affiliate of Vintage Capital Management, LLC (Vintage Capital) — for $1.37 billion. Vintage will buy the company’s outstanding shares for $15.00 per share in cash, denoting a premium of nearly 49% over the company’s closing price on Oct 30, 2017.
The transaction is expected to close by the end of this year, provided customary closing conditions are satisfied.
Consequently, shares of Rent-A-Center not only rallied 22%, but also hit a new 52-week high of $14.78 on Jun 18. We note that the stock has appreciated 74.1% compared to its industry’s gain of 6%, in the past three months.
Interestingly, Vintage has been looking to take over the company for long to enrich its rent-to-own portfolio. Notably, last November, Rent-A-Center had turned down a conditional, non-binding proposal from Vintage to buy all outstanding shares for $13 per share.
More than a week before this announcement, Rent-A-Center provided an update about its business.
This Zacks Rank #3 (Hold) company guided consolidated revenues between $2.640 billion and $2.690 billion for 2018, including core U.S. revenues of $1.835-$1.865 billion and Acceptance NOW revenues of $730-$750 million. Management also forecast adjusted earnings in the band of 65-90 cents a share.
For the second quarter, Rent-A-Center projected consolidated revenues of $640-$660 million. While core U.S. revenues are expected to range from $450 million to $460 million, revenues of Acceptance NOWare likely to come in between $170 million and $180 million. Management expects adjusted earnings per share of about 20-30 cents.
With strategies in place, Rent-A-Center is well on track to solidify its financial status and enhance results. Markedly, this April, core U.S. same-store sales rose 3.3% and same-store sales of Acceptance NOW increased 2.3%. Core U.S. same store sales jumped 3.6%, while Acceptance NOW sales were up 2.5% in May.
We are also encouraged by the company’s cost-saving initiatives, which are expected to generate annual run-rate savings of more than $100 million and savings of roughly $70 million in 2018.
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