Rent-A-Center Gets Another Buyout Offer From Vintage Capital

Rent-A-Center, Inc. (NASDAQ:RCII) is revisited by Vintage Capital Management, LLC (“Vintage”) with a proposal to acquire all of its outstanding shares in a cash transaction valued at $14 per share. Interestingly, Vintage has been looking to take over the company for long.

Last November, the company received conditional, non-binding proposal from Vintage to buy all outstanding shares for $13 per share.

The latest offer comes soon after Rent-A-Center’s board unanimously agreed on Jun 10 to continue with the execution of its strategic plan in the best interest of the company. This decision followed a strategic and financial review of alternatives, including the possible sale of the company. The board announced that its intent to be acquired was turned down due to the non-receipt of any proposal that would meet its target of maximizing shareholder value and have chances of conclusion.

Subsequent to this decision, the company also updated its business plan, which would significantly strengthen the financial profile and aid results.

Outlook

This Zacks Rank #3 (Hold) company projects consolidated revenues between $2.640 billion and $2.690 billion for 2018, including Core U.S. revenues of $1.835-$1.865 billion and Acceptance NOW (“ANow”) revenues of $730-$750 million. Finally, management envisions adjusted earnings for 2018 in the band of 65-90 cents.

For the second quarter of 2018, Rent-A-Center projects consolidated revenues of $640-$660 million. While Core U.S. revenues are expected to range from $450 million to $460 million, revenues of ANow are likely to come in between $170 million and $180 million. Management expects adjusted earnings per share of about 20-30 cents.

Clearly, this guidance reflects management’s confidence in the company’s capability to drive profitability, while enriching shareholders value. Let’s see, if these factors can drive growth for the stock, which has surged 38% in the past three months, outperforming the industry's rise of 13%.

Wrapping Up

With strategies in place, Rent-A-Center is well on track to solidify its financial status and enhance results. Markedly, in April, core U.S. same store sales rose 3.3% and same store sales of ANow increased 2.3%. Core U.S. same store sales jumped 3.6% and ANow 2.5% in May.

We are also encouraged by the company’s cost-saving initiatives, which are expected to generate annual run-rate savings of more than $100 million and savings of roughly $70 million in 2018. This compares favorably with management’s forecasts issued in February and April.

Stocks to Consider

Weight Watchers International, Inc. (NYSE:WTW) has a long-term earnings growth rate of 15% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

H&R Block, Inc. (NYSE:HRB) has a long-term earnings growth rate of 11% and a Zacks Rank #2 (Buy).

SP Plus Corporation (NASDAQ:SP) has a long-term earnings growth rate of 9% and a Zacks Rank #2.

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