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Aaron’s Acquires Progressive Finance for $700 Million

ATLANTA and DRAPER, Utah – Home furniture and appliance lender Aaron's In (NYSE:AAN) announced this morning that it has acquired web-based merchandise financier Progressive Finance Holdings, LLC ("Progressive") in an all-cash transaction valued at approximately $700 million.

With 2,130 company-owned and franchised stores in 48 states and Canada, Aaron's will operate Progressive as a wholly-owned subsidiary. John Robinson, Progressive's Chief Executive Officer, will join the Aaron's leadership team as executive vice president and CEO of Progressive, reporting directly to Ronald W. Allen, chief executive officer of Aaron's.

"This is a highly complementary and transformative acquisition for Aaron's, and we are eager to capture the significant opportunities this combination will provide for our customers, franchisees, and shareholders," said Aaron's chief executive officer of Ronald W. Allen. The CEO continued that he expects the transaction to create an immediately profitable revenue stream for Aaron's. Allen continued, "We expect that with Progressive's best-in-class virtual customer payment capabilities, coupled with our industry leading traditional lease-to-own model, we will create an omni-channel business, providing customers with better payment options, and enhancing Aaron's competitive position."

Progressive offers point-of-sale lease and purchase programs to customers who do not qualify for traditional, FICO-based financing. Aaron's said that Progressive's software provides automated lease processing, which eliminates the need for specialist in-store personnel. Progressive currently serves 5,500 retail partners with approximately 15,000 locations, including 40 of the top 100 and eight of the top 20 U.S. furniture and bedding retailers. Select merchant partners include Mattress Firm, Big Lots, Art Van Furniture and Sleepy's. Progressive is the preferred lease provider to the U.S. prepaid wireless industry and also partners with leading U.S. consumer electronics, appliance and jewelry retailers.

When asked by an analyst whether franchisees will look at Progressive's online financing and renting as competition, the CEO said that the online move will be a boost for them. This gives the stores an opportunity to expand their customer base into the unbanked market using Progressive Finance, driving incremental foot traffic into Aaron's company-operated and franchised stores.

In an open letter to its shareholders this morning, Aaron's CEO added that the franchisor plans to halt the number of stores that the company invests in while it increases store licenses sold to franchise owners. He estimates that the closure of underperforming stores will save Aaron's $25 million.

"Franchisees are integral to Aaron's success and we have also recently announced certain actions to strengthen our franchisee relationships. At our annual Manager's Meeting in March, 2014, we introduced several important initiatives to enhance franchisees' operations, including establishing a Franchisee Advisory Board to facilitate communications between Aaron's and our franchisees," CEO Allen wrote. Blue MauMau asked what sort of structure has been in place to communicate with its 781 franchisee population now but the company was not able to answer by the time this article was published.

Allen said that the company had shifted its policies to place its marketing fund at the discretion of franchisees and suspending mandatory store remodeling requirements. "Empowering our franchisees to allocate marketing funds themselves promises to drive improved local awareness and customer traffic to franchisee stores," he commented about franchisees having more say in their local marketing. "Overall, we will continue to support franchisees opening locations at a rate of approximately 3-4% per year as they continue to grow and build the Aaron's brand."

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Staff reporter for Blue MauMau