ATLANTA – Furniture leasing company Aaron’s has agreed to buy online rent-to-own finance company Progressive Finance Holdings for $700 million in cash in a bid to turn around its business even as it cut its first-quarter outlook.
Meanwhile, Aaron’s also said it rejected a takeover offer from Vintage Capital Management, its second largest shareholder, for $30.50 per share, a 1 per cent premium on the stock’s closing price Monday. Aaron’s says the offer is not in the best interest of shareholders.
Aaron’s sells and leases furniture and accessories and offers flexible payment plans for people with credit problems.
Aaron’s says it expects the acquisition of Progressive, from Summit Partners, to help its earnings in 2014.
Aaron’s also cut its first-quarter revenue and earnings outlook, blaming the weather and difficult economic conditions.
“Like many retail companies, we continue to be adversely affected by the current macroeconomic environment, and many of our stores were negatively impacted by abnormal weather conditions during the quarter,” said CEO Ronald W. Allen.
The Atlanta-based company now expects earnings of 51 cents to 54 cents per share, down from 57 cents to 62 cents per share. It expects revenue of $587.5 million, down from $600 million.
Analysts expect earnings of 59 cents per share on revenue of $598.9 million, according to FactSet.
Meanwhile, Aaron’s said in a letter to shareholder that Vintage, which has about a 10 per cent stake in Aaron’s and has a slate of board candidates up for election at the company’s 2014 annual shareholder meeting, did not give Aaron’s details about how it planned to finance the bid.
“Whether or not Vintage had these resources was critical information and our shareholders deserve to know the facts,” CEO Allen and Chairman Ray Robinson said in the letter.
Vintage did not immediately return a request for comment.
Founded in 1999, Progressive provides lease-to-own programs for furniture, electronics and appliances via 5,500 retail partners such as Sleepy’s and Big Lots in 15,000 retail locations in the U.S. Progressive offers lease and purchase programs to customers who do not qualify for traditional financing based on credit scores.
Shares edged up 24 cents to $30.47 in premarket trading.