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Why Rent-A-Center Stock Jumped 19.5% in April

By Steve Symington – May 8, 2019 at 7:13PM

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With its terminated merger finally in the rearview mirror, the rent-to-own industry leader looks forward to the road ahead.

What happened

Shares of Rent-A-Center (RCII 5.30%) climbed 19.5% in February, according to data from S&P Global Market Intelligence, after the rent-to-own operator secured a favorable settlement related to last year's terminated merger with private equity firm Vintage Capital Management. 

To be sure, Rent-A-Center soared as much as 11% on April 22, 2018 alone after the company revealed it had agreed to settle all litigation with Vintage Capital in exchange for a payment of $92.5 million in cash.  

Judge holding gavel at his bench

IMAGE SOURCE: GETTY IMAGES.

So what

The final deal helped extend Rent-A-Center's 12% pop in the month of March, which came after a Delaware court ruled that Rent-A-Center was well within its rights to call off the $1.36 billion merger.

At that time, however, it was unclear how much of a previously agreed $126.5 million merger termination fee Vintage would ultimately pay the company -- and the market was obviously happy last month with its $92.5 million haul. All told, Rent-A-Center expects to net pre-tax proceeds of roughly $80 million after paying all costs, fees, and expenses related to the cancelled agreement.

Now what

"We are pleased to finally conclude this matter, avoiding further litigation and providing certainty regarding the payment of the termination fee," stated Rent-A-Center CEO Mitch Fadel. "We look forward to turning our sole and undivided attention to executing our strategic plan focused on growing our business and enhancing value for our stockholders."

Indeed, with the threat of continued litigation now gone and after the company posted slightly better-than-expected first-quarter results earlier this week, Rent-A-Center investors can take solace knowing the company is honing its focus toward returning to sustained, profitable growth.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Rent-A-Center, Inc. Stock Quote
Rent-A-Center, Inc.
RCII
$18.08 (5.30%) $0.91

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