Are Rent-A-Center Shareholders Getting Enough in the Acquisition?

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Rent-A-Center Inc. (NASDAQ: RCII) shares made an incredible gain on Monday after the company announced that it would be taken private by Vintage Rodeo Parent, an affiliate of Vintage Capital Management.

The Rent-A-Center Board has unanimously approved the transaction and recommends that stockholders vote in favor of the transaction. Also, the transaction is expected to close by the end of 2018.

As for the deal, Vintage will acquire all the outstanding shares of Rent-A-Center common stock for $15.00 per share in cash. In total, the transaction is valued up to $1.365 billion, including net debt.

The transaction represents a premium of roughly 49% over the company’s closing stock price on October 30, 2017, immediately prior to the announcement that the company’s board of directors initiated a process to evaluate strategic and financial alternatives focused on maximizing stockholder value.

Upon completion of the transaction, Rent-A-Center will become a privately held company and its common shares will no longer be listed on any public market.

Mitch Fadel, CEO of Rent-A-Center, commented:

The Rent-A-Center Board, having just completed a comprehensive review of strategic and financial alternatives in consultation with outside legal and financial advisors, unanimously supports this transaction and is confident it maximizes value for stockholders while delivering a significant and immediate cash premium. Today’s exciting announcement reflects the significant progress we have made to materially improve our performance and would not have been possible without the hard work and focus of our talented co-workers over the last several months. Vintage is a natural partner for Rent-A-Center given its deep knowledge of the rent-to-own industry, and we look forward to partnering with them to realize the full benefits of the transaction.

Shares of Rent-A-Center were last seen up about 22% at $14.69, with a consensus analyst price target of $10.86 and a 52-week range of $7.22 to $14.78.