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Rent-A-Center Shares Spike on Vintage Offer

Rent-A-Center (RCII - Get Report) shares spiked in pre-market trading Friday after buyout shop Vintage Capital offered to acquire the rent-to-own company for $13 a share, in a move that comes after the activist-targeted business announced earlier this week it was considering strategic alternatives such as a sale.

"We have followed the RAC story, and your impact on the Rent-to-Own industry, for over 20 years and we are pleased to be a significant shareholder," Vintage Capital said in a letter to Rent-A-Center CEO Mark Speese.

The company's shares spiked by 6% to $9.92 a share after the bid was announced in an activist securities filing Friday. Vintage Capital, which is the majority owner of a smaller rent-to-own competitor, Buddy's Home Furnishings, had been interested in buying Rent-A-Center for some time. In July Vintage offered to buy Rent-A-Center for $15 a share or $800 million but the company rejected the offer.

However, the private equity firm, which accumulated a 6% Rent-A-Center stake, believes that the Plano-Texas-based company may be more amenable to a sale now after its announced Monday, Oct. 31 that it was launching a process to explore strategic alternatives, a move that came five months after activist Glenn Welling and his fund, Engaged Capital LLC, succeeded at installing a minority-slate of three dissident director candidates to the company's board.

In addition, in a key coup for Welling, the rent-to-own company's chairman, Steven Pepper, also on Oct. 31 resigned from his position. Pepper had been under pressure from Welling for months. Most recently, in June, Welling lashed out at Pepper over his use of the company's private jet even as the company continued to struggle.

On Monday, Rent-A-Center reported a loss of $0.15 a share for the third quarter, far short of a FactSet consensus estimate analysts of a loss of $0.03 a share.