Engaged Capital LLC of Newport Beach won its proxy battle against Rent-A-Center Inc. by gaining three seats on its board of directors.
Jeffrey J. Brown, Mitchell E. Fadel, and Christopher B. Hetrick were “overwhelmingly” elected to the seven-member board at the shareholders’ annual meeting, Engaged Capital said, citing preliminary results. They replaced three existing members, including Rent-A-Center’s founder.
Shares of Plano, Texas-based Rent-A-Center declined about 4% to a $670 million market cap. They’ve fallen about 80% in the past three years due to a series of problems, such as struggles with a new computer system.
Engaged Capital, which holds 17% of Rent-A-Center shares, wanted the board to explore all options, including a possible sale to a larger competitor.
Rent-A-Center founder Mark Speese, who started the company in 1986 and who took back the reins as chief executive in January, was pitching his own turnaround plan that didn’t include a sale. He lost his seat on the board but will continue as chief executive.
“The board must adopt a strategy that creates the optimal risk-adjusted outcome for all stockholders after all options are thoroughly explored,” Engaged Capital founder and Chief Investment Officer Glenn W. Welling said in a statement.
Engaged Capital’s strategy is to find good businesses trading at a significant discount to their intrinsic value and then serve as the catalyst for changes in management or boards. The firm, which began in 2012, has exited 15 core positions, with an average median return of 36%, Welling said.
The Business Journal reported on the coming proxy fight in the June 1 print edition of the paper.
