CANFIELD Rent-A-Center announces plans to buy Rainbow

-------The company's stock value shot up 94 percent at news of the acquisition.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
CANFIELD -- Rainbow Rentals, a locally based rent-to-own business that operates 124 stores in 15 states, is selling out to Rent-A-Center, a Plano, Texas, chain.
Rent-A-Center, which calls itself the nation's largest rent-to-own operator, announced Wednesday it will pay $16 per share in cash for the Canfield company.
Rainbow's 5.9 million shares make the deal worth about $95 million. Wayland Russell, Rainbow chairman and chief executive, owns nearly half the company with about 2.5 million shares.
Rainbow Rentals' stock values jumped 94 percent at the news. Traded under the symbol RBOW on NASDAQ, the stock closed at $15.80, up $7.64 for the day.
Those holding Rainbow stock options would receive an amount equal to the difference between $16 and the exercise price of the options, Rent-A-Center said.
Rainbow's shareholders and federal regulators must approve the transaction, which the companies expect to be complete in the second quarter.
High regard
Russell, who started the company with three others, said he has a high regard for Rent-A-Center and its senior management team.
"We believe that our customers will be well-served by this transaction, and that it will provide growth opportunities for our nearly 900 talented associates," he said.
Russell said the company's board of directors has unanimously approved the move. He and Rainbow president Michael Viveiros also have agreed to vote their shares in favor of the transaction.
Mark E. Speese, Rent-A-Center chief executive, said in a news release that the operating philosophies of the two companies are similar. He expects the transaction to increase value for his shareholders.
The acquisition is expected to result in cost savings in advertising, purchasing of rental merchandise and overhead for Rent-A-Center, he said.
Rainbow profits
Founded in 1986, Rainbow started with six stores and quickly expanded, but profits have been sagging lately. It reported third-quarter profits in October of $217,000, or 4 cents per share, down from $335,000, or 6 cents per share, for the same period in 2002.
Rainbow earned $926,000 in the first three quarters of 2003, down from $1.3 million in the same period a year before. The company has not yet filed its fourth quarter and annual reports for fiscal 2003.
Rent-A-Center operates 2,651 stores in all 50 states, Washington, D.C., and Puerto Rico. Its subsidiary, ColorTyme, also a rent-to-own chain, operates an additional 327 stores.
vinarsky@vindy.com