Shares of Rent-A-Center surged Monday after the company agreed to buy lease-to-own financing provider Acima Holdings for $1.65 billion in cash and stock.
The total includes $1.273 billion in cash and about 10.8 million Rent-A-Center shares (ticker: RCII) that are valued at $377 million. The deal, which was announced late Sunday, is expected to close during the first half of 2021. Rent-A-Center stock jumped 10% to $38.80 in afternoon trading Monday.
Rent-A-Center has obtained $1.825 billion in debt financing commitments from J.P. Morgan Securities, Credit Suisse (CS), and HSBC Securities to back the deal, a statement said.
Founded in 2013, Acima allows customers to buy items such as mattresses, furniture, and appliances through lease-to-own, or LTO, agreements. The company, which operates in more than 15,000 retail partner locations, offers flexible payment schedules, early purchase options, and “no credit needed” approvals. Acima’s annual revenue is expected to hit $1.25 billion this year, up from $97 million in 2016. Aries Capital Partners currently owns about 25% of Acima, a person familiar with the situation said. Aries declined to comment.
Rent-A-Center is a lease-to-own provider for the credit-constrained. Consumers who use Rent-A-Center don’t need a credit history or a minimum FICO score to “purchase” items. The company has about 1,950 Rent-A-Center stores in the United States, Mexico, and Puerto Rico, as well as 460 franchise locations. The total addressable market for lease-to-own is estimated at $40 to $50 billion, according to an investor presentation announcing the Acima deal. Shares of Rent-A-Center have more than doubled since hitting a low of $14.30 in March.
The Acima acquisition is expected to immediately add to Rent-A-Center’s adjusted earnings per share within the first full year after the deal closes, the statement said.
The two companies “share a common vision to expand the virtual LTO offering across a broader set of retail partners and to meet the needs of more customers through an integrated omnichannel strategy,” Rent-A-Center CEO Mitchell Fadel said in a statement. “Acima will help us strengthen our organization, accelerate growth and increase our virtual partner base, allowing us to better serve more consumers with the flexibility of LTO.”
Steve McLaughlin, founder and CEO of Financial Technology Partners, advised Acima, while Wachtell, Lipton, Rosen & Katz served as legal advisor. Jack LaGere and Justin Aylward of J.P. Morgan Securities and Credit Suisse provided financial advice to Rent-A-Center. Sullivan & Cromwell acted as their attorney.
Write to Luisa Beltran at luisa.beltran@dowjones.com
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December 22, 2020 at 03:22AM
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Rent-A-Center Stock Jumps. The Company Is Buying Acima for $1.65B - Barron's
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