Blog Coverage Rent-A-Center Adopts Stockholder Rights Plan; Executes a Deal-Staller for Engaged Capital

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LONDON, UK / ACCESSWIRE / March 29, 2017 / Active Wall St. blog coverage looks at the headline from Rent-A-Center, Inc. (NASDAQ: RCII) as the Company announced on March 28, 2017, that its Board of Directors has unanimously adopted a stockholder rights plan to protect the best interests of all Rent-A-Center’s stockholders. Register with us now for your free membership and blog access at:

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One of Rent-A-Center’s competitors within the Rental & Leasing Services space, Ryder System, Inc. (NYSE: R), announced on March 25, 2017, that its management will review first quarter results on April 25, 2017, at 11:00 a.m. ET. AWS will be initiating a research report on Ryder System in the coming days.

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The Rights Plan

According to the announcement, the Rights Plan is designed to protect Rent-A-Center’s stockholders by reducing the stakes of an event where any person or group holds the control of the Company through open market accumulation, without offering appropriate compensation to its stockholders for such control, or offering the Board of Directors ample time to make reasonable judgment.

The Rights will become exercisable if a person or group becomes the beneficial owner of 15% or more of the outstanding Common Stock of the Company. The Rights is additionally exercisable in case the entity announces a tender offer for 15% or more of the outstanding Common Stock of the Company. In the event, when the Rights become exercisable, each Right will entitle its holder to purchase at the Right’s exercise price, a number of shares of Common Stock or equivalent securities with a market value at that time of twice the Right’s exercise price.

The Power Shift

This announcement comes in the light of the recent resignation of Robert D. Davis, CEO, and Director, Rent-A-Center on January 09, 2017. Board Chairman Mark E. Speese, the Company’s founder, and former CEO, took over as interim CEO. Post this management transition, Rent-A-Center confirmed that Engaged Capital, LLC, has provided notice of intent to nominate five individuals to stand for the three available positions up for elections to the Board of Directors, on February 23, 2017.

Engaged Capital LLC, holds 12.9% stake in Rent-A-Center and has expressed its interest to acquire the Company which has been struggling with declining sales for over a year. The activist fund, however, disapproved Rent-A-Center’s ‘risky’ turnaround strategy and urged the Company to consider other options.

Rent-A-Center’s Announcement

On February 14, 2017, Rent-A-Center announced decisive and immediate actions to drive improvement and deliver greater value in the long-term. The Company announced several measures including achievement of optimal product mix by shifting to an upper concentration of the higher-end, and providing a better value proposition while being more customer-centric. The Company probably plans to minimize costs and boost revenues after directions from Engaged Capital on the retailer to explore an acquisition.

February Key Operating Metrics

Rent-A-Center recently reported key operating metrics for its Core US and Acceptance NOW businesses on for February 2017 on March 16, 2017. The Company reported that its Core US business observed sales to decrease continuously owing to drop in merchandise sales revenue from the tax refund delay.

The average monthly rate of new agreements declined by 4.1% in February FY17 compared to February, FY16. The co-worker turnover, however, advanced by 75.6% and 14.7% in February FY17 for the Core US business. The store sales for the Automotive Segment declined 3.8% y-o-y in February FY16. The merchandise sales had dipped by 15% in February FY16 which caused delay in tax refunds, thus eventually leading to sales depreciation.

Rent-A-Center, a rent-to-own industry leader based in Texas, operates approximately 2,600 stores in the US, Mexico, Canada and Puerto Rico with an additional 1,870 Acceptance Now kiosk locations in the US and Puerto Rico.

The Rights Plan has an expiration date of March 28, 2020, or earlier if stockholder approval of the Rights Plan has not been obtained, or prior to Rent-A-Center’s 2018 Annual Meeting of Stockholders.

Stock Performance

At the close of trading session on Tuesday, March 28, 2017, Rent-A-Center’s stock price slightly rose by 0.33% to end the day at $9.10. A total volume of 1.01 million shares were exchanged during the session. The Company’s share price has gained 4.60% in the past one month. The stock currently has a market cap of $476.39 million and has a dividend yield of 3.52%.

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