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Rent-A-Center investors are seeing red

BY CSA STAFF

Investors at the nation’s largest rent-to-own company are their losing patience.

Activist hedge fund Marcato Capital Management LP demanded in a letter on Tuesday, July 25, that Rent-A-Center start the process of selling itself. If the company doesn’t, the hedge fund threatened to throw out board members up for re-election at next year's annual meeting, according to Reuters.

In the report, a letter from Marcato partner Shawn Badlani, said, “Unless Rent-A-Center promptly commences a full sale process, Marcato plans to initiate and/or support efforts to remove all incumbent directors who are up for election at the 2018 annual meeting.”

The letter added that at least one unidentified party interested in buying Rent-A-Center might raise its offer if management was ready to negotiate. It also warned directors not to stall.

Marcato isn’t alone in its quest. Hedge fund Engaged Capital has been urging Rent-A-Center to sell itself for months, arguing that an overhaul of the company could be best achieved in the hands of private owners. Engaged Capital won a proxy contest in June, a move which afforded the company three board seats at Rent-A-Center, the report said.

Marcato and Engaged Capital believe the furniture company is "brazenly ignoring the will of the shareholders," according to the letter.

The document refers to Rent-A-Center’s rejection of takeover interest from private equity firms HIG Capital and Lone Star Funds. The snub took place prior to turning down an offer of $800 million from buyout firm Vintage Capital earlier this month, according to an earlier Reuters report.

Marcato also believes Vintage could pay more for the company if management negotiated. The company explained that the buyout firm’s $15 per share offer was an "opening offer, not Vintage's best and final offer," according to the letter.

Barnes & Noble is experiencing a similar situation. Activist investor Sandell Asset Management issued its own letter to Barnes & Noble’s board of directors on Tuesday, July 25, urging the company to sell itself. The firm believes a sale would not only improve the value of the brand, but protect itself against a volatile marketplace that continues to take a toll on sales.

Sandell recently started buying a stake in Barnes & Noble. It is now among the retailer's 10 biggest investors, according to Fortune.

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