Vintage Capital Management, which is trying to acquire Atlanta-based Aaron’s Inc., has notified the furniture and electronics rental company that it will nominate five board candidates at this year’s annual shareholders meeting in May.
Vintage is Aaron’s second-largest shareholder with about 7.2 million shares, or about 10 percent of the shares outstanding.
Earlier this month, Orlando-based Vintage, headed by Brian Kahn, launched its fourth attempt in three years to acquire Aaron’s, for $2.3 billion, or $30.50 a share. A spokesman told The Atlanta Journal-Constitution earlier this week that the offer had not changed.
Kahn has been highly critical of the rent-to-own company’s financial performance and company leadership, and specifically singled out Chairman and Chief Executive Officer Ronald Allen in making his case for new directors. Allen is also a director who is up for re-election this year.
In a statement, Aaron’s said the board will review the nominations and make recommendations “in due course.” The company has nine regular board members.
Aaron’s also said Friday that the board continues to review Kahn’s buyout offer and has retained Goldman, Sachs & Co. as an additional adviser. Allen said hiring Goldman, Sachs “underscores the commitment of the Aaron’s Board and management team to fully evaluate the Vintage proposal as well as all opportunities to create and enhance long-term value for all Aaron’s shareholders.”
Aaron’s on Friday closed at $30.47, up 55 cents in Nasdaq trading.
Kahn said Friday Aaron’s has lost more than 50,000 customers since Jan. 1 based on Vintage’s analysis.
“It has become clear to us that immediate and decisive action is needed to stabilize Aaron’s and preserve shareholder value,” Kahn said in a statement. “Changes to Aaron’s senior management team over the last two years have resulted in the implementation of the wrong strategies for the business.”
A longtime Aaron’s director, Allen stepped in as interim CEO in late 2011 to replace Robin Loudermilk, who stepped down due to mental health concerns. Allen took over as Aaron’s chairman and CEO a few months later, receiving a $4.1 million compensation package.
Aaron’s reported a 38 percent drop in fourth-quarter earnings earlier this year. At the time, Allen warned that “due to the nature of the sales and lease ownership business it will take several quarters of increasing our customer base to significantly grow revenues and earnings.”
Kahn said Aaron’s shareholders have suffered “under the failed leadership of a conflicted board that has lacked the independence and skills necessary to properly act as our fiduciaries.” He added that Aaron’s needs a board that “can stand up to current management.”
Kahn directed specific criticism to Allen, former chairman of Atlanta-based Delta Air Lines, and another director, former AT&T executive Ray Robinson. Kahn said both “have a well-established and public track record of failing shareholders by pursuing ill-advised strategies that have soured relationships with Aaron’s customers, franchisees and employees.”
Robinson is a former board chairman of Citizens Bancshares Corp. and former president of AT&Ts Southern Region Business Services Division. Efforts to reach Robinson for comment were unsuccessful.
In addition to Kahn himself, Vintage’s board nominees are W. Kenneth Butler Jr., former Aaron’s chief operating officer; Matthew Avril, the retired president of Starwood Hotels & Resorts Worldwide Inc.; Spencer Smith, an Aaron’s franchisee; and Thomas Bernau, another Aaron’s franchisee.
Aaron’s said another institutional investor, Starboard Value LP, also has submitted four nominees. The names of the candidates were not immediately available.
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