(Corrects paragraph 7 to say Aaron's revenue, not earnings, outlook was cut to $587.5 million)
April 15 (Reuters) - Aaron's Inc, a rent-to-own furniture and electronics retailer, rejected a $2.3 billion takeover offer from a major shareholder and instead acquired a retail credit financing firm for about $700 million.
In a letter to shareholders, the retailer called the offer from Vintage Capital Management, which owns 10 percent in the company, "inadequate and illusory".
The offer, made in February, was the private equity firm's fourth attempt to buy the consumer electronics and furniture rental chain since 2011.
Aaron's said its cash deal to buy Progressive Finance Holdings LLC, which provides web-based lease-to-own financing programs for retailers, will allow it to provide its customers with better payment options and expand further into the virtual rent-to-own market.
Aaron's offers customers the option to rent a product on layaway now and buy it later.
The acquisition of Progressive Finance, which services more than 5,500 retailers in the United States, will add to Aaron's cash earnings from 2014, the company said in a statement on Tuesday.
Separately, Aaron's cut its first-quarter revenue outlook to $587.5 million from nearly $600 million. The company said it expected the effect of a severe winter weather to negatively impact earnings in the range of 5 cents to 6 cents per share.
Aaron's shares were down 1.8 percent in light premarket trading. They had closed at $30.47 on the New York Stock Exchange on Monday.
(Reporting by Shailaja Sharma in Bangalore; Editing by Joyjeet Das and Prateek Chatterjee)