Court’s Decision goes in Favor of Rent-A-Center, Disappoints Vintage Capital Management

Judge ruled that Rent-A-Center was within its rights to step out of the $1.36 Bn merger deal with Vintage Capital Management.

America’s Delaware state court has ruled that Rent-A-Center, a U.S. public furniture and electronics rent-to-own company, is not bound by its $1.36 Bn merger deal with U.S. private equity firm, Vintage Capital Management. The court said the rent-to-own company was within its rights to step out of the deal. The rent-to-own company used its right to back out of the deal under the contract between the two parties, said Sam Glasscock III, Delaware Chancery Court’s Vice Chancellor. Vintage failed to inform Rent-A-Center about its extension of the deal to the date that was agreed upon, which triggered the rent-to-own company’s right to call it off, Glasscock III added.

“Rent-A-Center is happy that the validity of its termination of the merger deal with Vintage has been affirmed by the court. Looking forward, the company will continue to concentrate on executing its strategic plan to improve value for its stockholders and grow its business,” stated Mitch Fadel, Rent-A-Center CEO.

Rent-A-Center also maintains its stand that a termination fee of $126.5 Mn, which is much higher than most termination fees, is pending from Vintage’s side. It says the fee was guaranteed by U.S. capital market firm B. Riley Financial Inc., Vintage’s banker.

The judge has not yet decided on the issue of the termination fee

According to B. Riley, the position of Rent-A-Center on the termination fee has no merit. The capital market company also expressed its disappointment after the court’s decision was announced. Glasscock III has not yet come to a decision on the issue of the termination fee.

The merger deal required the U.S. Federal Trade Commission’s antitrust clearance because Vintage owns Buddy’s Home Furnishings, a U.S. competitor of Rent-A-Center. According to the agreement between Vintage and Rent-A-Center, either party was able to terminate the deal at will if neither side gives notice of the contract’s extension in case the deal is not approved by December 17, 2018.

With no notice from Vintage, Rent-A-Center terminated the deal on December 18, 2018. Later, it was sued by Vintage as the private equity firm claimed that Rent-A-Center was deceptive in the manner that it pretended to stay committed to the deal up until it suddenly backed out.