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Rent-A-Center Acquires Rent Way For $567 Million
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The acquisition will put Rent-A-Center at 3,535 locations before any store closures/merges. For reference, easyhome, the 4th largest rental purchase company in North America, has 170 stores.

Update 1: Rent-A-Center will host a conference call to discuss the transaction, today, Tuesday, August 8, 2006, at 8:00 a.m. EDT. For a live webcast of the call, visit

The acquired stores will have the opportunity for significant growth. Rent-A-Center averages about $70,000 monthly revenue per location, versus Rent Way's $55,000.

Rent-A-Center (RCII), the nations largest Rent to Own company has acquired Rent-Way Inc. (RWY), the third largest rental purchase company in the U.S., for $567 million. Rent Way employs 4,000 people.

Rent-Way operates 784 stores in 34 states. The acquisition will put Rent-A-Center at 3,535 locations before any store closures/merges. For reference, easyhome, the 4th largest rental purchase company in North America, has 170 stores. 

Historically, RTO companies are bought for between 8 and 10 times monthly rental revenue. Rent-A-Center paid $101.5 million for 295 Rent Way locations in 2002 (see story).

Rent Way averaged $43 million in rental revenue per month for the quarter ending June 30th, 2006. The quarter saw same store sales increase 4.1%, the second consecutive quarterly increase and the 11th positive same store revenue quarter out of the last 12 (see story).

Rent Way and Rent-A-Center share many markets. When Rent-A-Center purchased the 295 Rent Way locations in 2002, 60% were eventually merged/closed (see story).

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The acquisition will be presumably be subject to compliance with applicable antitrust requirements. When Rent-A-Center acquired Rainbow Rentals in 2004 (see story), the transaction received early termination (see notice pdf) of the waiting period specified in the Hart-Scott-Rodino Antitrust Improvement Act of 1976 on March 11, 2004. The merger closed in May 2004.

Rent Way acquisition rumors have persisted for years. Those rumors began again in earnest last month when Reuters reported an anonymous source claiming Rent Way had hired Citigroup to oversee the sale of the company. Rent Way issued a response saying, "The Company engaged Citigroup Global Markets in Fall 2004 to assist it in evaluating refinancing and strategic alternatives. This work is ongoing. The Company's policy is not to comment on market rumors, and will have no further comment on this rumor." (see story).

Rent Way Executives

William S. Short
John A. Lombardi
Vice President, Interim Controller and Chief Accounting Officer
Ronald D. DeMoss
Vice President and General Counsel
Greg L. Matheny
Executive Vice President and Chief Operating Officer


William E. Morgenstern
Chairman of the Board
Gerald A. Ryan
Chairman Emeritus
William Lerner
John W. Higbee
Robert B. Fagenson
Marc W. Joseffer
Lead Director
Jacqueline E. Woods
William S. Short
Director and President

William S. Short, was named President of Rent Way in May, 2005 after founder William Morgenstern relinquished his role as President and Chief Executive Officer. Morgenstern, who guided the company through it's accounting scandals and subsequent recovery, remains the non-executive Chairman of the Board.

What does this mean for independent operators? If history is any judge, a significant amount of talent will become available. It may take some time, but this acquisition will eventually increase the number of independent operators as multi-unit and regional managers make the jump to owner.

ColorTyme, the franchise arm of Rent-A-Center, offers credit against their franchise fee for every year of RTO industry experience. Premier Rents assists many former pubic company managers develop business plans and find financing to open their own RTO company.

...developing...check for updates.

Official release, issued Tuesday Morning, follows...

PLANO, Texas--(BUSINESS WIRE)--Aug. 8, 2006--Rent-A-Center, Inc. (the "Company" or "Rent-A-Center") (NASDAQ/NGS: RCII), the nation's largest rent-to-own operator, and Rent-Way, Inc. ("Rent-Way") (NYSE: RWY), a major rental purchase company operating 784 stores in 34 states, announced today that they have entered into a definitive agreement pursuant to which Rent-A-Center will acquire Rent-Way for $10.65 in cash per share of Rent-Way common stock.

The agreement also provides that each holder of options of Rent-Way will receive an amount equal to the difference between $10.65 and the exercise price of the option. The transaction is valued at approximately $567 million, which includes the acquisition of all outstanding common stock and options discussed above, net debt and other liabilities of Rent-Way, as well as the redemption of all outstanding convertible preferred stock.

"We are very excited about this transaction with Rent-Way," commented Mark E. Speese, the Company's Chairman of the Board and Chief Executive Officer. "Bill Morgenstern and his management team have built a successful rent-to-own operation as demonstrated by the fact that Rent-Way has accomplished eleven positive same store sales quarters out of the last twelve.

"Given our track record of successfully integrating acquisitions and implementing our proven business model, we believe that this transaction will create additional value for our stockholders. Giving effect to Rent-Way's forecasted 2006 EBITDA of approximately $60 million and the full realization of cost savings through leveraging our existing infrastructure and scale, pro-forma EBITDA of $85 million should be achieved, with further growth continuing from the execution of our business model. In fact, we believe we will be able to build on Rent-Way's success as evidenced by our 2003 acquisition of 295 Rent-Way stores. With our national brand and advertising driving customer traffic and our broad selection of high quality, brand-name merchandise, we believe we can grow both revenue and store operating income to nearly comparable results to our core stores," continued Mr. Speese.

"Furthermore, we expect to realize these cost savings in advertising, merchandise purchases and general and administrative expenses. As a result, following an initial six-month transition period and the realization of cost savings in the last half of the year, we believe the transaction will be accretive to our 2007 diluted earnings per share by approximately one to two cents, accelerating in 2008 and 2009 to approximately $0.20 and $0.35 diluted earnings per share, respectively. I want to point out that our diluted earnings per share accretion of approximately one to two cents in 2007 and approximately $0.20 in 2008 is after the negative impact of approximately $0.11 and $0.06 diluted earnings per share, respectively, due to the amortization of intangible assets related to the customer and non-compete agreements. These are assets we must record and amortize in connection with the acquisition, but they roll off quickly resulting in higher levels of accretion in the future," Mr. Speese said.

Mr. William Morgenstern, Chairman of the Board of Rent-Way stated, "I have known Mark Speese for many years and believe he and his strong management team have a vision for Rent-A-Center that our team can embrace. We believe that our customers will be well served by this transaction and that it will provide additional growth opportunities for our nearly 4,000 talented associates.

"As a co-founder of Rent-Way 25 years ago, I have great pride in our collective accomplishments over the years achieved by the dedication and commitment of the fine Rent-Way team which have now culminated with the sale of our business to a first-class industry leader," Mr. Morgenstern added.

Rent-A-Center intends to fund the acquisition primarily with an increase in its senior credit facility. The acquisition, which is expected to be completed in the fourth quarter of 2006, is conditioned upon customary closing conditions for a transaction of this nature, including the receipt of requisite regulatory approval and approval of Rent-Way's shareholders.

In connection with this transaction, Rent-A-Center was advised by Bear, Stearns & Co. Inc. and Rent-Way was advised by Citigroup Global Markets Inc.




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