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New Spin: Lease-to-Own Retailer Leader and Virtual Services to Separate

Leading lease-to-own retailer Aaron's, Inc. (AAN) has announced the separation of its branded stores and online portal from its fast-growing leasing partnership segment, Progressive Leasing. This is accompanied by a rejig of the post-Spin management teams, and is expected to close by the end of the year. Progressive was originally acquired in 2014 for $700m and has grown significantly, now accounting for $1.7bn in FY19 revenues (or 54% of total revenue).

Break-Up Details…
On July 29, 2020, Aaron's, Inc. (AAN) announced its plan to become two independent businesses, focused on its Aaron's branded stores and its retail-partnership arm Progressive Leasing, which works with other stores in offering lease-to-own financing services. The separation is expected to be tax-free to AAN shareholders and will be completed by the end of 2020.

The Edge View...
Post-Spin Players: While the press release is not explicit as to which company is the Parent and which is the Spinoff, we anticipate that the Progressive Leasing segment will be retained by the Parent and the legacy Aaron's brand will become the Spin. This separation will see the brick-and-mortar stores owned and franchised by Aaron's become an independent company as revenues have stagnated, supported by the fast-growing Progressive Leasing business;
2014 Acquisition Realizes Value: Progressive Leasing was originally acquired by AAN in April 2014 for $700m, and was a way for the company to enter into the digital lease-to-own space and increase in-store foot traffic for customers looking for alternative ways of leasing products. Since the acquisition, the business has steadily increased its revenue contributions, to the point that it now accounts for more than half ($1.7bn, or 54%) of total company revenue in 2019 - meaning Progressive Leasing has more than paid back to its acquirer in value creation and helping AAN to grow in recent years;
Changing of the Guard: The Spinoff will be accompanied by a shake-up in the top leadership of both companies. Current President and CEO of the combined company John Robinson will continue in that role until whichever comes first - the separation or December 31, 2020, at which point he will transition into the role of Chairman of the Aaron's post-Spin business. Steve Michaels (current CFO and President of Strategic Operations) will become the CEO of Progressive Leasing, while segment President Blake Wakefield will continue in that role post-Spin. Meanwhile, current Aaron's segment President Douglas Lindsey will take office as AAN CEO post-Spin, and Steve Olsen (COO) will become President of the post-Spin Aaron's. Current combined Chairman Ray Robinson will become the Chairman of the Progressive Leasing business (our indication this segment may be the Parent);