Rent-A-Center said Tuesday it terminated its $1.3 billion merger deal with private-equity firm Vintage Capital Management, citing its improved financial performance.
Under the merger agreement announced in June, either party had until Dec. 17 to extend the agreement for another three months. Vintage owns rent-to-own retailer Buddy’s Home Furnishings, a leading competitor of Rent-A-Center, and the deal has been awaiting antitrust clearance by the Federal Trade Commission.
According to Rent-A-Center, it did not receive an extension notice from Vintage by the deadline and its board decided not to exercise its right to extend the agreement.
“In light of the current financial and operational performance of the company, the board of directors of Rent-A-Center … instead elected to exercise the company’s right to terminate the merger agreement,” Rent-A-Center said in a news release, noting the agreement requires Vintage to pay it a reverse breakup fee of $126.5 million within three days.
But Vintage responded that Rent-A-Center’s move was invalid and the agreement remains in effect.
“Rent-A-Center’s actions constitute a further material breach of the merger agreement,” Vintage said in a statement, adding it “intends to pursue all available remedies against Rent-A-Center.”
Vintage’s buyout offer followed a lengthy period of slumping sales for Rent-A-Center, which operates about 2,500 stores in the United States, Mexico, Canada, and Puerto Rico. It had been under pressure from its largest shareholder, Engaged Capital, to sell itself.
For its most recent quarter, Rent-A-Center reported a 5.7% increase in same-store sales, with the company reporting it executed a turnaround plan that “included enhancing our value proposition, optimizing our cost structure, and improving cash flow.”
Buddy’s Home Furnishings claims to be the third largest rent-to-own retailer in the United States, with more than 330 stores nationwide. Vintage offered to pay $15 a share, or $800 million, for Rent-A-Center and assume debt that would bring the total value of the deal to $1.365 billion.