Please ensure Javascript is enabled for purposes of website accessibility

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

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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


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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.