Atlas Copco may get $3.2 billion in cash for RSC.
Atlas Copco's sale of Rental Service Corp., which is believed to be the largest single transaction in the history of the equipment rental sector, should have little impact on the U.S. rental firm's future operations, say company officials.
Under the terms of the deal announced on Oct. 6, New York City-based Ripplewood Holdings and Oak Hill Capital Partners will share a 50% stake in the deal valued at $3.8 billion. They plan to keep existing management in place.
The sale includes $3.3 billion in cash plus $400 million in "contingency" notes payable to Atlas Copco in 2008 and 2009, depending on RSC's future financial performance. After taxes, the sale is expected to yield a cash windfall of $3.2 billion for the Stockholm, Sweden-based manufacturer.
When the sale closes, expected by year-end, Atlas Copco plans to keep a 14.5% stake in RSC.
"Our participation at the board will of course give us an opportunity to follow and advise how this business is going to develop over time," said CEO Gunnar Brock. "We believe the value is going to be superior to the alternative of cashing in today," he added.
The manufacturer says it plans to keep its Prime rental business, which supplies generators and compressors to the oil, gas and port sectors, and move it under its Compressor Technique division.
Selling RSC would help Atlas Copco divest a capital-intensive business and smooth out its global manufacturing reach. "We are now reducing the relative importance of U.S. and increasing the Asian marketplace," Brock said, adding, "That is of course the most dynamic and most expanding area today."