Aaron’s Bidder Willing to Raise Offer if Retailer Engages

(Corrects spelling of company in final paragraph of story that ran on March 8.)

Vintage Capital Management LLC, the private equity firm waging a takeover fight for rent-to-own furniture chain Aaron’s Inc. (AAN), said it would consider raising its $2.2 billion offer if the company engaged in talks.

“They won’t return my calls,” Brian Kahn, founder and managing member of Vintage, which owns 10 percent of Aaron’s stock. “We would love to sit down and negotiate with the company.”

Vintage offered $30.50 a share for the Atlanta-based retailer on Feb. 7. Aaron’s responded by saying it wasn’t in discussions with anyone about a takeover, though it would evaluate the unsolicited offer. Two weeks later, the furniture seller announced the formation of a transaction committee.

To advance its case, Vintage said yesterday that it will nominate five directors, including Kahn, for the nine-member board. The slate will be put to a vote at the company’s shareholder meeting in May.

The Orlando, Florida-based investment firm has made three previous offers for Aaron’s and none became public, Kahn said. After continually being rebuffed, Vintage opted to become a large investor and publicly disclose its latest bid to get shareholders on its side, Kahn said.

‘Ignored Them’

“We’ve made offers and they’ve always ignored them,” Kahn said. “Now we’re showing up as a shareholder.”

Tim Lynch, a spokesman for Aaron’s, declined to comment. Aaron’s said yesterday that it has received Vintage’s board nominations, as well as a four-member slate from Starboard Value LP.

Aaron’s, which has more than 2,000 locations, rose 1.9 percent to $30.48 at the close yesterday in New York. The shares have gained 13 percent since Feb. 6, the day before Vintage’s offer was disclosed.

Aaron’s has retained Goldman Sachs Group Inc. as a financial adviser, the company said yesterday in a statement. In addition to evaluating the offer from Vintage it’s also been “undertaking a broad review of opportunities to enhance” shareholder value.

Vintage has secured funding, including current lenders to Aaron’s, to complete a transaction, Kahn said. He declined to name the firms. His slate would replace Chairman Ronald Allen, who also serves as the chain’s chief executive officer. Allen took over for Robert Loudermilk, son of founder Charles Loudermilk in 2011.

Return Management

Kahn is pushing for a takeover in part so he can bring back the company’s old management, including former Chief Operating Officer Kenneth Butler, who is one of the board nominees. The slate also includes two large Aaron’s franchisees. Kahn is a former franchisee himself who sold his stores back to Aaron’s in 2008.

Vintage also sees a deal as a way to expand Buddy’s Home Furnishings, a rent-to-own chain of 170 stores that the firm purchased in 2012, Kahn said. Buddy’s rents furniture by the week, instead of each month like most of Aaron’s stores.

That kind of flexibility is more appealing to today’s cash-strapped shoppers because they pay less up front to take home a television or bed, he said.

“It is a different customer base,” Kahn said. “If we own Aaron’s, we can very rapidly open Buddy stores” by using its distribution network and existing merchandise, he said.

Vintage has taken large stakes in other companies and made bids. The firm tried to buy Anaren Inc., an electronics manufacturer, in April 2013. Anaren was eventually sold to private-equity firm Veritas Capital for $333 million.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net James Callan

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.