Myajc.com
Log on to our premium website to read more exclusive coverage about the business challenges Aaron’s faces, content you can only find at www.Myajc.com/business.
An unsolicited effort to buy Aaron’s died Tuesday after the Atlanta rent-to-own giant appointed the leader of the takeover attempt to its board.
Brian Kahn, managing member of Vintage Capital Management, Aaron’s second-largest shareholder, said his company will no longer seek to acquire Aaron’s now that he has struck a deal to be on Aaron’s board.
“We will still be able to have an impact on the company’s direction,” he said. “But it will have to be as a 10 percent shareholder instead of a 100 percent shareholder.”
Kahn’s appointment capped a contentious four months for Aaron’s. The company faced not only the hostile bid from Vintage but also a potential mutiny among franchisees unhappy with the company’s direction.
In April the company warned investors that its first quarter numbers would not be good.
Gilford Securities analyst Robert Straus praised Tuesday’s truce between Vintage and Aaron’s, saying, “It appears now everyone is on the same team to create incremental shareholder value.”
To some, that looked unlikely in April. Vintage had dropped its $2.3 billion bid to buy Aaron’s after the company last month announced it had bought online lender Progressive Finance for $700 million, a deal that would raise the purchase price for Aaron’s.
Even then, however, Kahn suggested he could regroup and make another offer.
To head off another bid, Aaron’s negotiated with Vintage behind the scenes. Their talks sometimes spilled into public spats, most notably at the end of April when Kahn accused the company of proposing a two-year standstill of any takeover bids in return for a board seat.
Aaron’s called the accusations inaccurate and said it was disappointed that Kahn had broken an agreement to keep talks confidential.
“We reached out to you in good faith to attempt to negotiate a settlement to avoid a costly, distracting and unnecessary proxy contest that you have initiated and that is not in the best interests of all of Aaron’s shareholders,” board chairman Ray Robinson wrote in an April 30 letter.
On Tuesday, Robinson sang a different tune: “We continue to engage in active dialogue with our shareholders and greatly appreciate the support we have received,” he said in a statement.
Franchisee Adam Marlin praised Kahn’s appointment to the board. Marlin, who has been critical in the past of the company’s direction, said Kahn, a former Aaron’s franchisee, knows the challenges operators face and can propose real-world solutions.
“I feel grateful that the voice of what is best for Aaron’s core business will be heard by the board of directors,” he said.
Kahn will take his seat May 20 as Aaron’s expands its board from eight to 10 members. Kahn also will be a part of Aaron’s slate of board nominees for the company’s upcoming annual meeting in June. He had been running on a competing slate.
Aaron’s continues to struggle. The company reported last month that net earnings fell to $38.3 million in the quarter ended March 31, down from $51 million a year earlier.
Revenue dipped to $585.4 million, from $593 million.
Aaron’s said Vintage will vote its shares in support of all of nominees Aaron’s board puts forth at the annual meeting as part of a new agreement with the retailer.
The company also has formed an operational and financial advisory committee on core business matters. Kahn, Allen and Ray Robinson will be the committees’ founding members.
About the Author
