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Caufield & James, L.L.P

Serving clients in Hawaii and throughout California, including Sacramento, Los Angeles, Chico, Jackson and San Diego

Call Us Now Toll-Free

Rent-A-Center merger on the rocks after FTC request

Rent-A-Center merger on the rocks after FTC request

| Dec 20, 2018 | Mergers & Acquisitions |

Two companies are publicly sparring over a merger that could affect rent-to-own consumers in California and across the country. Rent-A-Center, which specializes in rent-to-own sales of household goods and products like electronics and furniture, said that it terminated its agreement to merge with Vintage Capital Management, a private equity firm that also owns one of its major competitors in the market. Earlier, the merger had been approved by a decisive vote of Rent-A-Center shareholders in September 2018.

In response, the equity firm said that Rent-A-Center’s actions were invalid, breaching the contract between the companies. Vintage said that the merger agreement remains valid and that it intends to take action to make sure it proceeds. These statements came after the Federal Trade Commission presented both companies with a second request for more information to investigate the antitrust impact of the acquisition. However, Rent-A-Center said that it would not extend the end date of the agreement to accommodate the FTC request, saying that the company had the right to end the agreement. It also asked for $126.5 million from Vintage as a penalty.

One of the issues that led to the FTC’s potential concern about the merger is that Vintage Capital already owns Buddy’s Home Furnishings, a competitor with Rent-A-Center. Buddy’s has 330 stores across the country, while Rent-A-Center has 2,350 stores in the United States (including Puerto Rico), Mexico and Canada as well as 1,250 smaller kiosks. If Rent-A-Center prevails in the dispute, it could emerge in a stronger financial position, especially as many private equity firms are more interested in retailers’ real estate than continuing their consumer business.

Mergers and acquisitions can be complex developments, especially when external legal review holds up the process. A business law attorney can help businesses to negotiate fair agreements and represent their interests throughout the merger process.

Source: Retail Dive, “Rent-A-Center, Vintage Capital spar over merger“, Daphne Howland, 12/18/2018

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