From Home Furnishing Business
Rent-A-Center Shareholder Wants Board to Sell Company
An investment firm with a 12.9% stake in struggling Rent-A-Center (NASDAQ: RCII) is urging its board of directors to sell the company, and threatened to launch a proxy fight at this year’s annual meeting if the board doesn’t act quickly.
In a letter to board made public this week, the investment firm Engaged Capital accused board members of being “asleep at the wheel” as the company’s stock price has declined more than 75% in the last two years.
Noting that former CEO Robert Davis fired Chief Financial Officer Guy Constant about one month before the board terminated Davis, the firm said “the recent steps the board has taken to oversee management change and propose a turnaround plan have been reactive rather than proactive.”
“As we cannot imagine a board negligent enough to allow a ‘lame duck’ CEO to terminate his CFO weeks before his own departure, we are left to surmise that the board had no intention of making a CEO change until very recently,” the letter said.
Rent-A-Center’s founder, board chairman and former CEO Mark Speese has been interim CEO since Davis’ departure, and Engaged Capital officials questioned whether Speese can objectively evaluate what is needed to turn around the company’s fortunes.
“We fear that the board may be placing undue reliance on Mr. Speese’s judgment, which has the clear potential to be in conflict with what is best for the company’s shareholders,” the letter said. “It is our belief that the most logical outcome from a strategic alternatives process is the sale of the entire company.”
The investment firm said it believes Rent-A-Center can recover, but a turnaround would be more efficient if Rent-A-Center were privately held.
The firm also said it is “fully prepared” to nominate a slate of independent directors if the board fails to “act objectively and expediently for the benefit of all shareholders.”
In a statement, Rent-A-Center officials said the board is “taking decisive and immediate action to drive improvements” and “remains committed to acting in the best interests of all shareholders.”
The statement said the steps include shifting to a higher concentration of higher-end products; providing a better value proposition that will help extend average rental time; stabilizing the workforce by adding back a full-time employee at most stores; utilizing technology investments to enable or accelerate business strategies to find more innovative ways to serve customers; and implementing a more streamlined collections process to reduce delinquencies and collection times.
“We are confident that these decisive actions, along with our recent management changes and headcount reduction, will help correct the current trajectory of the company, driving revenue growth and profitability and delivering enhanced value for our stockholders,” the company said.