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(Adds statement from B. Riley)
NEW YORK, March 14 (Reuters) - Retailer Rent-A-Center Inc was within its rights to back out of a $1.36 billion merger deal with private equity firm Vintage Capital Management last year, a Delaware state court ruled Thursday.
Vice Chancellor Sam Glasscock III of the Delaware Chancery Court said that Vintage's failure to inform Rent-A-Center that it was extending the merger deal by an agreed-upon date triggered Rent-A-Center's right to call it off under the two parties' contract.
Rent-A-Center is a "rent-to-own" business, allowing customers to rent furniture, electronics and other goods with the option of eventually purchasing them.
"We are pleased that the court has affirmed the validity of our termination of the merger agreement with Vintage Capital," Rent-A-Center Chief Executive Mitch Fadel said in a statement. "Looking ahead, we will continue to focus on executing our strategic plan to grow our business and enhance value for our stockholders."
Vintage could not immediately be reached for comment.
Rent-A-Center also maintains that Vintage owes it a $126.5 million termination fee, which was guaranteed by Vintage Capital's banker, B. Riley Financial Inc. The fee is much higher than most termination fees, which are typically about three percent of a deal's value.
Glasscock has not yet decided that issue. B. Riley said in a statement that it was disappointed with the court's decision and believed Rent-A-Center's position on the fee had no merit.
Vintage agreed to acquire Rent-A-Center last June. Because Vintage owns a competing chain of rent-to-own retail stores, Buddy's Home Furnishings, the deal required antitrust clearance from the U.S. Federal Trade Commission.
Vintage and Rent-A-Center agreed that if the deal was not approved by Dec. 17, 2018, either party could give notice that it was unilaterally extending the contract for an additional 90 days.
However, the contract stated that if neither side gave that notice, then either one could terminate the deal at will. Rent-A-Center terminated the deal on Dec. 18, after receiving no notice from Vintage.
The private equity firm then sued Rent-A-Center, claiming it acted deceptively by acting as though it still intended to follow through with the deal up until the sudden termination. B. Riley subsequently joined the case.
Glasscock ruled on Thursday that the plaintiffs had offered no explanation for not giving notice, leading to the "startling conclusion" that "certain Vintage and B. Riley personnel, in the context of this $1 billion-plus merger, simply forgot" to give it.
The judge said it was "understandable" that Vintage and B. Riley were "angered by what they see as Rent-A-Centers sharp practice," but that they had not shown why Rent-A-Center could not exercise its contractual right. (Reporting by Brendan Pierson in New York; editing by Marguerita Choy)