United Rentals Inc. and RSC Holdings Inc. recently announced that they have entered into a definitive merger agreement under which United Rentals will acquire RSC in a cash-and-stock transaction valued at $18 per share, or a total enterprise value of $4.2 billion, including $2.3 billion of net debt. The boards of directors of both companies have unanimously approved the proposed transaction and recommended that their respective stockholders approve the proposed transaction.
The proposed transaction will create a leading North American equipment rental company with a more attractive business mix, greater scale and enhanced growth prospects. The combination is also expected to accelerate United Rentals’ growth with industrial customers as well as provide a lower cost base and a less volatile revenue profile to better position the company through all phases of the business cycle.
The new United Rentals is well positioned to benefit from increased rental penetration, the continued strength of the industrial sector, serving customers across a variety of industries and a recovery in construction activity. United Rentals and RSC have already begun working on a plan to facilitate a smooth integration of the businesses and realization of over $200 million of potential cost savings.
“This transaction marks a transformative moment in our company’s history,” said Michael Kneeland, president and CEO of United Rentals. “Combining the experience and resources of two top performing equipment rental companies creates an exceptional company.”
The cash portion of the transaction will be financed through new debt issuance and drawing on current loan facilities. United Rentals has obtained financing commitments from Morgan Stanley Senior Funding Inc., Bank of America, Merrill Lynch and Wells Fargo in support of the transaction. United Rentals’ Board also announced its intention to authorize after closing a stock buyback of up to $200 million of the company’s common stock. United Rentals’ current intention is to complete the stock buyback within six to 12 months after closing.
The transaction is anticipated to provide over $200 million of annual cost savings through the elimination of redundant infrastructure, branches and overhead, two thirds of which are expected to be achievable within the first 12 months.