Renters Choice to Buy Thorn’s U.S. Unit for $900 Million
Renters Choice Inc. said Wednesday that it will buy British company Thorn’s U.S. rent-to-own business for $900 million in cash, combining the two largest chains of appliance and furniture rental centers that give customers an option to buy.
Thorn Americas Inc., the leading U.S. rent-to-own company, with about 1,400 stores under the Rent-A-Center, Remco and U-Can Rent names, had revenue of about $890 million last year.
The company has been the target of class-action lawsuits by consumer groups in five states that accuse the company of charging illegal and exorbitant interest rates. The rent-to-own industry has come under fire because customers can end up paying several times the purchase price for items they buy.
Thorn would shed some of its potential legal liabilities through the sale to Renters Choice, which has faced similar suits in New Jersey and Wisconsin.
Renters Choice said the combination will produce a company with about $1.2 billion in annual sales, or more than a 25% share in the $4-billion-a-year rent-to-own market. Dallas-based Renters Choice operates 687 stores in all 50 states.
Britain’s Thorn, which was spun off from music company EMI Group in 1995, said in May that it would sell the two-thirds of its businesses outside Britain in a reorganization to reverse declining profit.
Renters Choice would fund the transaction partially through the sale of a 25% stake in the combined company to Apollo Management, an investment firm led by financier Leon Black, which would purchase $235 million of preferred stock.
The company has not yet decided if there would be any store closings or layoffs.
Renters Choice shares rose $5.44 to close at $31.50 on Nasdaq, and Thorn’s American depositary receipts rose $1.38 to close at $15, also on Nasdaq.
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