(Bloomberg) -- Rent-A-Center Inc. doesn’t have to complete a $1.37 billion buyout by Vintage Capital Management LLC after a judge found the home-furnishings retailer properly canceled the deal over a technicality.
Vintage officials failed to meet a deadline to extend their offer for Plano, Texas-based Rent-A-Center, clearing the way for the rent-to-own company to pull the plug on the transaction, Delaware Chancery Judge Sam Glasscock III ruled. The fund owns a competing rent-to-own chain.
“It appears that Vintage simply forgot the end date in the merger agreement -- and its implications,” Glasscock said in his 66-page ruling.
The judge didn’t say whether Rent-A-Center or Vintage was entitled to $126 million in breakup fees over the deal’s collapse. Earlier this week, he asked lawyers for both sides to give him more information about the fee.
Rent-A-Center shares jumped more than 8 percent on the ruling. They’ve risen to $21.30 in New York, 42 percent higher than Vintage’s original $15-a-share offer in June.
Vintage Capital managing partner Brian Kahn didn’t immediately respond to request for comment.
B. Riley Financial Inc., which backed Vintage’s bid and also sought to have Rent-A-Center consummate the deal, fell 1.6 percent to $16.75.
Mitch Fadel, Rent-A-Center’s CEO, said he was pleased with Glasscock’s ruling and is “looking forward” to the judge’s breakup-fee decision. The company continues “to believe we are entitled to that fee in accordance with the clear terms of the merger agreement,” he said in an emailed statement.
Orlando-based Vintage offered to buy the chain of 2,350 rent-to-own furniture, appliance and electronics stores in June 2018. Antitrust concerns delayed the deal and regulators demanded more information about the transaction. Rent-A-Center and Vintage predicted they’d close the buyout in the first quarter of 2019.
Rent-A-Center officials cited Vintage’s failure to meet a deadline for extending its buyout offer when it nixed the deal in December. Vintage executives countered that their partner was looking for an excuse to cancel the deal because its business picked up after the transaction was announced.
In court filings, the fund argued the two companies had worked out an extension with the U.S. Federal Trade Commission as part of the antitrust review. “There is no doubt that Rent-A-Center was on notice that Vintage had elected to extend the end date to allow the parties to continue engaging with the FTC, secure regulatory approval and, thereafter, close the merger,’’ Vintage’s lawyers said in court filings.
Rent-A-Center managers responded that Vintage sought to blame the rent-to-own chain for its own mistake.
“Rent-A-Center and Vintage contracted for the certainty of an election by written notice delivered in a specific manner,’’ Rent-A-Center’s attorneys said in court papers. “Vintage knew how to deliver written notice under the merger agreement because it did so on multiple other occasions.’’
The case is Vintage Rodeo Parent LLC v. Rent-A-Center Inc., 2018-0927, Delaware Chancery Court (Wilmington).
(Updates with arguments in case starting in seventh paragraph.)
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