Rent-A-Center To Acquire The Rental Store, Inc. For $75.5M

Sterne Agee has published a research report on Rent-A-Center RCII after the company announced its acquisition of The Rental Store, Inc. In the report, Sterne Agee writes "RCII announced the acquisition of privately held The Rental Store, Inc. (TRS) for $75.5M in cash. TRS currently operates 145 locations within various retailers such as Ashley Furniture, Conn's, Rooms to Go furniture, etc. TRS's relationship with Conn's is relatively new (six months old) and particularly interesting as it helps RCII expand its own kiosk business (RAC Acceptance) beyond furniture stores (Ashley) into electronics/appliance stores. TRS is expected to add revenue/operating income of $100M/$15M in 2011. We see this contribution getting even bigger in 2012 as we see potential for the Conn's relationship to expand from 40 locations to Conn's entire chain of 76 stores and for TRS to add locations at new/existing retailers. Also, 2012 should benefit from a full year of synergies versus partial synergies in 2011." Sterne Agee maintains its Buy rating and has raised the price target from $33 to $36. Rent-A-Center closed yesterday at $31.88.