RAINBOW RENTALS Officials proceed with cruise for employees after sale deal

By DON SHILLING
VINDICATOR BUSINESS EDITOR
CANFIELD -- Rainbow Rentals officials and store managers are headed off today for a Caribbean cruise, just three days after a Texas chain announced a deal to buy the company.
Wayland Russell, Rainbow chairman and chief executive, said he and the board of directors were adamant that the seven-day trip go on. The annual cruise is considered part of the employees' compensation.
"There was no way we were cheating them out of that," he said.
The trip also will give employees the opportunity to question him about the deal, he said. Senior executives of Rent-A-Center, which is acquiring Rainbow Rentals, will join the cruise near the end, he said.
Rainbow's regional executives and senior officers also are on the trip. The spouses of all employees are invited, which raises the total count to about 200.
Russell said he doesn't think store managers should have much concern because Rent-A-Center has said it intends to keep a vast majority of the Rainbow stores.
He said, however, that he is concerned about the welfare of the 40 people who work in Rainbow's corporate office in Canfield. He said he will work with the company's human resource department and outside agencies to find work for them.
The deal
He said the deal includes $3.5 million in payments to buy out stock options, encourage employees to stay while the deal is pending, and provide severance pay.
Russell, who started Rainbow in 1986 with three others, said he has ideas about what he may do next but won't think much about them until the deal is completed.
"I'm 52. I'm very, very hungry, and I still have the fire in the belly," he said.
Russell compared giving up the company to giving away a daughter on her wedding day.
"I've never cried so much in three or four days, but I know this is the right thing to do," he said.
Although earnings have been down, Russell said Rainbow is healthy and has a manageable debt of $4 million. Still, he thinks it's best for its investors and employees that Rainbow be part of a larger organization.
He said the only way for Rainbow to post adequate earnings is to have a large number of stores so it can spread out its fixed costs. Officials decided they couldn't grow large enough, he said.
No. 4 chain
Rainbow is the No. 4 rent-to-own chain with 124 stores and $103 million in annual revenue, while Rent-A-Center of Plano, Texas, is No. 1 with 2,651 stores and $2 billion in revenue.
The deal, announced Wednesday, would pay $16 for each of Rainbow's shares, which is a 94 percent premium of Rainbow's closing price Tuesday. The value of the deal is about $95 million. Shareholders will be asked to approve the deal in the second quarter.
shilling@vindy.com