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Delaware Court of Chancery Determines Rent-A-Center Validly Terminated Merger
Friday 15 March 2019

15 March 2019 - The Court of Chancery of the State of Delaware has ruled that Texas, US-based rent-to-own specialist Rent-A-Center, Inc. (NASDAQ: RCII) validly terminated the Agreement and Plan of Merger, dated June 17, 2018, by and among the company and certain affiliates of Vintage Capital Management, LLC, the company said.

The Court of Chancery has requested that the parties submit additional briefs, after which it will render a decision regarding whether Vintage Capital and B. Riley Financial, Inc. (as guarantor) are obligated to pay the USD 126.5m reverse termination fee to Rent-A-Center.

As previously announced on December 18, 2018, after the company did not receive the extension notice from Vintage Capital that was required by December 17, 2018 to extend the merger agreement's said end date, the company terminated the deal.

Last November, Rent-A-Center announced it had received a conditional, non-binding proposal from Vintage Capital Management, LLC to acquire all of the outstanding shares of the company for USD 13.00 per share in cash.

This equated to USD 800m.

As announced by the company on 30 October 2018, the Rent-A-Center board of directors had initiated a process to explore strategic and financial alternatives.

Rent-A-Center said it did not receive an extension notice from Vintage Capital at or prior to the end of day on 17 December, which was the deadline set forth in the merger agreement for either party to provide notice to the other of its election to extend the end date in the merger agreement to 17 March 2019, due to the continued pendency of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, resulting from the previously disclosed Second Request received by the parties from the Federal Trade Commission in connection with the pending transaction.

In light of the current financial and operational performance of the company, the board of directors of Rent-A-Center determined not to exercise its right to extend the end date and instead elected to exercise the company's right to terminate the Merger Agreement.

Accordingly, Rent-A-Center notified Vintage Capital of Rent-A-Center's termination of the deal and noted Vintage Capital's obligation under the terms of the deal to pay the company a reverse breakup fee of USD 126.5m within three business days.

Rent-A-Center owns and operates stores in the United States, Mexico, Canada and Puerto Rico, and Acceptance NOW kiosk locations in the United States and Puerto Rico.

The company's Rent-A-Center Franchising International subsidiary is a national franchiser of rent-to-own stores operating under the trade names of "Rent-A-Center," "ColorTyme," and "RimTyme."

J.P. Morgan is serving as financial advisor and Winston and Strawn LLP is serving as legal advisor to Rent-A-Center.
Date Published: 15/03/2019
Target: Rent-A-Center, Inc
Country: USA
Deal Size: 1.37bn (USD)
Sector: Wholesale/Retail
Type: LBO
Financing: Cash
Status: Terminated
Buyer: Vintage Capital Management