Rent-A-Center to Acquire Rent-Way Inc. for 0.54 Times Revenue

Weekly Corporate Growth Report, Aug 14, 2006

The Deal: Rent-A-Center Inc. has agreed to purchase RentWay Inc. for S 10.85 per share, or $280.1 million. The deal values Rent-Way at a premium of 29 percent over the company's share price prior to the deal announcement. In addition, Rent-A-Center will assume Rent-Way preferred stock and debt, bringing the total deal value to about $567 million. Renl-A-Center expects the deal to close in the fourth quarter of 2006.

Discussion: Rent-Way Inc. is the second-largest US rent-to-own retail chain. The company rents home entertainment equipment, electronics, jewelry, computers, and major appliances. Rent-Way also offers prepaid local phone service through 80%-owned subsidiary dPi Teleconnect. Rent-Way operates nearly 800 stores in more than 30 states.

Rent-A-Center is the leading US chain of rent-to-own stores. The company operates about 2,760 stores in North America and Peurto Rico. The company operates stores under the Rent-A-Center, Rent Rite, Rainbow Rentals, and Get It Now names. Rent-A-Center rents name-brand home appliances and furnishings, consumer electronics, and computers.

Rent-A-Center stated that it expects the acquisition to add one to two cents per share to earnings in 2007, 20 cents in 2008, and 35 cents in 2009.