RAINBOW RENTALS Shareholders approve sale for $95 million

The takeover is expected to be completed Friday.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
Businessmen who started Rainbow Rentals with six stores in 1986 cashed out when shareholders approved the sale of the 124-store chain for $95 million.
"This is a day of victory," said Wayland Russell, chairman and chief executive of the Canfield-based company, after the vote Wednesday at the Holiday Inn in Boardman.
Shareholders owning 84 percent of the stock approved the sale to Rent-A-Center, the nation's leading rent-to-own chain, for $16 a share. The stock was trading at $8.16 the day before the deal was announced Feb. 4.
The deal not only is good for shareholders, but it also shows that company employees built a "quality organization," Russell said. The sale is expected to close Friday.
The outcome of the vote was not in doubt because Russell holds 43 percent of the Rainbow's stock. His 2.5 million shares will be worth $40 million.
Russell, 53, said he is open to other business opportunities but didn't want to discuss specifics. He said he and his wife intend to maintain their home in Canfield.
"We love this community. We may travel, but this will be our home," said Russell, who grew up on the South Side of Youngstown and Southern Boulevard in Boardman.
Background
He and the three others who worked for other rental companies founded Rainbow after meeting at industry events. After failing in a bid to buy another business, they decided to create their own company.
One of partners, Michael Viveiros, is Rainbow president and owns 256,000 shares, or 4 percent of the stock. Another founder, Lawrence Hendricks, was chief operating officer until he resigned last year. He has since started England Custom Furniture Direct in Boardman. He owns 548,000 shares, or 9 percent of the stock.
Those three partners bought out another partner, Jason Alford, in 1997.
Rainbow Rentals began its expansion right after its founding and never stopped. It had 50 stores by 1995 and 100 stores by 2001.
Russell said Wednesday that company officials decided Rainbow wasn't large enough to compete.
"The behemoths in our industry had become 900,000-pound gorillas," he said.
Texas-based Rent-A-Center has about 2,600 stores.
Large chains can dominate a market more easily because they can spread out advertising and other costs over more stores, he said.
Rainbow officials spent a year and a half studying whether to try to grow larger, he said. They decided Rent-A-Center's offer was too beneficial for shareholders to pass up.
What happened
Rainbow's heyday was in 1999 and 2000 when its stock was trading at nearly $14 a share and the company was ranked by Forbes magazine as one of the nation's best 200 small companies.
But operational problems developed, which decreased earnings and caused the stock to fall to about $4 a share in 2001. Russell said the company was working its way back, and the stock value was rising.
Russell said Rent-A-Center said the vast majority of Rainbow stores will be kept open, and Russell said they all will be open initially.
All of the store managers, midlevel field supervisors and two regional vice presidents are being retained, he said.
About 40 workers at company headquarters are losing their jobs. Some have been offered positions at Rent-A-Center's headquarters but may not want to move, he said.
shilling@vindy.com