* Rejects shareholder Vintage Capital's $2.3 bln offer
* Aaron's decision to reject offer "sensible" - analyst
* Buys financing firm Progressive Finance for $700 mln
* Aaron's cuts first-quarter earnings, revenue estimate
* Shares fall as much as 8 pct
(Adds background, CEO and analyst comment, first-quarter
earnings estimate; updates share price)
By Shailaja Sharma
April 15 Aaron's Inc, a rent-to-own
furniture and electronics retailer, rejected a $2.3 billion
takeover offer from a major shareholder and instead bought a
web-based retail credit financing firm for about $700 million to
provide customers with easier payment terms.
Aaron's shares fell as much as 8 percent to $27.95 after the
retailer, already facing slowing sales, also cut its profit and
revenue estimate for the January-March quarter, blaming the
severe winter in North America and weak consumer spending.
The $30.50-per-share offer from Vintage Capital Management,
Aaron's second-largest shareholder with a 10 percent stake, was
"inadequate and illusory", the retailer said in a letter to
shareholders on Tuesday.
Vintage Capital's offer, made in February, was the private
equity firm's fourth attempt since 2011 to buy the largest
rent-to-own retailer in the United States.
Aaron's decision to reject the offer was sensible said
Gilford Securities analyst Robert Straus. "We believe that
Aaron's is worth substantially more."
The company gives customers the option to rent a product on
layaway and buy it later. But Aaron's sales growth has been
slowing and in a bid to revive growth at existing stores, it has
slowed the expansion of its Aaron's and HomeSmart stores.
The retailer is also trying to drive growth by cutting
costs, increasing its franchisee network and growing its online
presence, Chief Executive Ronald Allen said on a conference call
Aaron's said buying Progressive Finance Holdings LLC, a
provider of web-based lease-to-own financing programs for
retailers, would allow it to give customers better payment
options and expand further into the virtual rent-to-own market.
"The transaction is transformable and makes a leader in the
rent-to-own market even more competitive," analyst Straus said.
The acquisition of Progressive Finance, which services more
than 5,500 retailers in the United States, would add to cash
earnings from 2014, Aaron's said.
The company, which has more than 2,130 owned and franchised
stores across North America, said the severe winter weather hurt
earnings by 5-6 cents per share in the first quarter ended
"Like many retail companies, we continue to be adversely
affected by the current macroeconomic environment, and many of
our stores were negatively impacted by abnormal weather
conditions during the quarter," CEO Allen said.
Aaron's cut its revenue estimate to $587.5 million from
nearly $600 million. It estimated same-store sales in
company-operated stores fell 2 percent in the quarter.
The Atlanta-based company lowered its earnings estimate to
51-54 cents per share from 57-62 cents per share.
Analysts on average were expecting a profit of 59 cents on
revenue of $598 million, according to Thomson Reuters I/B/E/S.
The company said it would announce its first-quarter results
on April 25.
Aaron's shares were down 5.2 percent at $28.88 in afternoon
trading on the New York Stock Exchange. The stock has risen more
than 12 percent since Vintage Capital made its offer on Feb. 7.
(Editing by Joyjeet Das, Prateek Chatterjee and Savio D'Souza)