From Home Furnishing Business
Rent-A-Center Adopts Shareholder Rights Plan
Rent-A-Center (NASDAQ: RCII), which is facing a proxy fight from the hedge fund Engaged Capital, has adopted a shareholder rights plan that will make it more difficult for the fund, or any other large shareholder, to gain controlling interest without the consent of the board of directors.
The plan, known in investment circles as a "poison pill" because it makes a hostile takeover more difficult, gives Rent-A-Center shareholders the right to purchase one share of a newly created series of preferred stock for each share of common stock they own.
Rent-A-Center said the purchase rights would be triggered if a person or group accumulates 15% or more of the company's common stock.
Engaged capital recently increased its stake to 16.9%, but the retailer said the plan wouldn't be triggered unless the fund further increases its holdings.
"The Rights Plan is intended to enable all Rent-A-Center stockholders to realize the value of their investment in the company and ensure all stockholders receive fair and equal treatment," the company said in a statement announcing the plan. "The Rights Plan is also designed to protect Rent-A-Center stockholders by reducing the likelihood that any person or group would gain control of the Company through open market accumulation without appropriately compensating its stockholders for such control or providing the board sufficient time to make informed judgments."
Rent-A-Center has been weakened by declining same-store sales and a falling stock price in recent quarters, and Engaged Capital has been pressuring the board to sell the company. Last month, the hedge fund said it would nominate five people for election to the board of directors at the upcoming annual meeting.
Engaged Capital's nominees include former Rent-A-Center CEO Mitchell Fadel and retired Aaron's executive Ken Butler.