* Rejects shareholder Vintage Capital's $2.3 bln offer
* Aaron's decision to reject offer "sensible" - analyst
* Buys financing firm Progressive Finance for $700 mln
* Aaron's cuts first-quarter earnings, revenue estimate
* Shares fall as much as 8 pct
(Adds background, CEO and analyst comment, first-quarter earnings estimate; updates share price)
April 15 (Reuters) - Aaron's Inc, a rent-to-own furniture and electronics retailer, rejected a $2.3 billion takeover offer from a major shareholder and instead bought a web-based retail credit financing firm for about $700 million to provide customers with easier payment terms.
Aaron's shares fell as much as 8 percent to $27.95 after the retailer, already facing slowing sales, also cut its profit and revenue estimate for the January-March quarter, blaming the severe winter in North America and weak consumer spending.
The $30.50-per-share offer from Vintage Capital Management, Aaron's second-largest shareholder with a 10 percent stake, was "inadequate and illusory", the retailer said in a letter to shareholders on Tuesday.
Vintage Capital's offer, made in February, was the private equity firm's fourth attempt since 2011 to buy the largest rent-to-own retailer in the United States.
Aaron's decision to reject the offer was sensible said Gilford Securities analyst Robert Straus. "We believe that Aaron's is worth substantially more."
The company gives customers the option to rent a product on layaway and buy it later. But Aaron's sales growth has been slowing and in a bid to revive growth at existing stores, it has slowed the expansion of its Aaron's and HomeSmart stores.
The retailer is also trying to drive growth by cutting costs, increasing its franchisee network and growing its online presence, Chief Executive Ronald Allen said on a conference call with analysts.
Aaron's said buying Progressive Finance Holdings LLC, a provider of web-based lease-to-own financing programs for retailers, would allow it to give customers better payment options and expand further into the virtual rent-to-own market.
"The transaction is transformable and makes a leader in the rent-to-own market even more competitive," analyst Straus said.
The acquisition of Progressive Finance, which services more than 5,500 retailers in the United States, would add to cash earnings from 2014, Aaron's said.
The company, which has more than 2,130 owned and franchised stores across North America, said the severe winter weather hurt earnings by 5-6 cents per share in the first quarter ended March.
"Like many retail companies, we continue to be adversely affected by the current macroeconomic environment, and many of our stores were negatively impacted by abnormal weather conditions during the quarter," CEO Allen said.
Aaron's cut its revenue estimate to $587.5 million from nearly $600 million. It estimated same-store sales in company-operated stores fell 2 percent in the quarter.
The Atlanta-based company lowered its earnings estimate to 51-54 cents per share from 57-62 cents per share.
Analysts on average were expecting a profit of 59 cents on revenue of $598 million, according to Thomson Reuters I/B/E/S.
The company said it would announce its first-quarter results on April 25.
Aaron's shares were down 5.2 percent at $28.88 in afternoon trading on the New York Stock Exchange. The stock has risen more than 12 percent since Vintage Capital made its offer on Feb. 7.
(Editing by Joyjeet Das, Prateek Chatterjee and Savio D'Souza)