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 Center acquisitions.

Update
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.

Mark Speese
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"

William Morgenstern
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 conference call.

Rent Way's previously scheduled earnings release and conference call is still on for tomorrow, Thursday 12-19 at 4:30pm EST...DON'T MISS IT
 

Please check back throughout the day for updates as they happen