Aaron's Board Of Directors Is Evaluating A $2.3 Billion Buyout Offer

Aaron's Inc., the home furnishings and electronics rent-to-own retail chain, said Friday its board of directors is evaluating a $2.3 billion buyout offer from a large investor.

Vintage Capital Management, which holds a 10 percent stake in Aaron's, or 7.2 million shares, launched its fourth attempt in three years to acquire the company, this time for $30.50 a share, nearly 13 percent higher than Aaron's closing price Thursday on Nasdaq.

In a late-afternoon statement to The Atlanta Journal-Constitution, Aaron's acknowledged receiving the offer. "The Board of Directors will evaluate the offer in line with its fiduciary duties," the statement said. "The company is not currently in discussions with any party regarding any offer to acquire the company."

News of the offer sent the company's stock more than 19 percent higher than its previous day's close at one point.

A letter to the Aaron's board from Brian Kahn, a Vintage managing member, said Aaron's Chairman and Chief Executive Officer Ronald Allen was informed Wednesday of Vintage's continued interest in acquiring the company.

Orlando-based Vintage said it has had an 18-year relationship with the Atlanta company, which it called a "great jewel of Georgia." The investment firm said it has significant experience in the rent-to-own industry, including several years as Aaron's second-largest franchisee. Vintange also is the majority owner of Buddy's Home Furnishings, a rent-to-own business operating primarily in the Southeast.

Kahn said the company was "at a crossroads that will culminate with a sale of the company."

"We believe that our proposal is compelling and in the best interest of all Aarons"� stakeholders, including its stockholders, employees and franchisees," Kahn said in his letter to the board.

The company's largest shareholders are Vintage and mutual fund company Fidelity Investments"� parent firm, which has a nearly 11 percent stake.

Aaron's founder, R. Charles Loudermilk Sr., is the largest shareholder among the company's insiders, with almost 4.1 million shares, a 5.4 percent stake.

Allen and Chief Financial Officer Gilbert L. Danielson hold much smaller stakes, 37,530 and 221,243 shares, respectively, according to company filings.

In Nasdaq trading, Aaron's shares traded as high as $32.27 and as low as $27.86 during the day Friday. The stock closed at $28.32, up $1.27 or nearly 5 percent.

The buyout offer comes on the heels of a downturn in Aaron's business. The company had 2,151 company operated and franchised Aaron's and HomeSmart locations at the end of December. That store count also included the RIMCO auto rental brand, which the company has since sold.

Aaron's reported a 38 percent drop in fourth-quarter earnings Friday, although the company beat Wall Street expectations. In announcing the quarterly results, Allen warned that "due to the nature of the sales and lease ownership business it will take several quarters of increasing our customer base to significantly grow revenues and earnings."

To focus more on the performance of its Aaron's and HomeSmart rental businesses, the company sold its RIMCO auto leasing operations to Rent-A-Wheel /Rent-A-Tire for an undisclosed amount.

Aaron's said net income for the period ending Dec. 31 fell to $22.7 million, or 30 cents a share on a diluted basis, compared with $36.6 million, or 48 cents a diluted share, in the same period a year ago. Analysts surveyed by Zacks expected per-share results of 29 cents per share.

Sales during the fourth quarter fell 2 percent to $553.9 million.

Allen, the former head of Delta Air Lines who was named CEO of Aaron's in February 2012, said 2013 was "a year of challenges and change for Aaron's and growing revenues and adding customers has been difficult with the ongoing economic pressures on low to middle income consumers."

Allen added that a strengthened management team and operating practices and procedures should help improve the company's financial performance this year.

A longtime Aaron's board member, Allen stepped in as interim CEO in late 2011 to replace Robin Loudermilk, who stepped down due to mental health concerns.

Allen took over as Aaron's chairman and CEO a few months later, receiving a $4.1 million compensation package. The package included included $1.6 million in salary and bonus, $2.5 million in company stock, and use of the company's jet, valued at $3,833. He led Atlanta-based Delta from 1987 to 1997,

R. Charles Loudermilk Sr., Aaron's founder and former chairman, retired in September 2012. He founded the company in 1955 after borrowing $500. Last year, the company had revenues of $2.2 billion.

Franchise Ranking History
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