Rent Way has announced the sale of 28% of it's locations to
competitor Rent a Center. 295 stores have been sold, bringing
Rent Way's store count down to 767 from 1062.
The announcement was made to Regional Managers at a hastily
assembled meeting in Orlando Florida this morning. Store level
managers were informed via conference call at 10:00am.
The actual locations being sold are said to be "scattered". The
purchase price is $101,500,000 in cash. ($344,000 per location).
The average monthly revenue for the locations being sold is
$34,000, Rent a Center paid a 10 multiple for the stores. This
is at the high end of the customary selling price for Rent a
Over 1,000 Rent Way employees will
be affected by the acquisition of 295 stores by Rent a Center.
Concern among those employees is very high since
Rent Way and Rent a Center exist in many of the same markets.
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It is unclear how many of the 295 locations will be closed and
consolidated with existing Rent a Center locations.
Closing of the transaction is subject to obtaining necessary
clearances under the
Hart- Scott-Rodino Act, an antitrust regulation requiring
any investor seeking to acquire either a 15% stake or a stake
valued at more than $15 million in a particular security to file
a notification with the federal government. The filing marks the
beginning of a 30 day review period.
As is required by Rent Way bank covenants, all proceeds will be
used to pay existing bank debt. $10 million will be held back by
Rent-A-Center to secure Rent-Way's indemnification obligations,
$5 million for 90 days and $5 million for 18 months. Closing is
expected in 30-45 days.
Rent a Center CEO
"We are excited about this opportunity to add a significant
number of stores to our store base. The anticipated enhancements
and improvements represented by the integration of these stores
into our system through the application of our proven business
model constitutes a promising opportunity to create additional
value for our stockholders. We believe this transaction,
following an initial transition period, will be accretive to our
2003 earnings per share"
Rent Way CEO
"After examining all of our options to lower our cost of debt
with minimal dilution to our shareholders, we have elected to
sell a block of 295 stores. This sale will allow us to
significantly reduce our debt and focus on the markets where we
have significant market share and operating strength. Once we
rationalize our corporate overhead and refinance our outstanding
senior debt, we expect to return to profitability and get on
with growing our business."
According to Rent Way's Vice President and CFO William
McDonnell, The company is still working with Salomon Smith
Barney on refinancing alternatives. He also stated that 2003
guidance may be delayed until after closing. The company
previously stated guidance would be given during Thursday's
Rent Way's previously scheduled earnings release and conference
call is still on for tomorrow, Thursday 12-19 at 4:30pm EST...DON'T
Please check back throughout the day for updates as they
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