United Rentals Inc., the world’s largest industrial equipment rental company, has announced plans to swallow chief rival RSC Holdings Inc. for $1.9 billion in cash and stock, as that industry continues to shrink.
Both companies’ Boards of Directors have unanimously approved the $18-per-share merger—a price that represents a 58% premium over RSC’s closing price on Thursday (Dec. 15).
|United Rentals supplied hundreds of aerial work platforms, forklifts, light towers and other equipment for the seven-year rehabilitation of the Woodrow Wilson Bridge in Washington, D.C.|
Friday’s (Dec. 16) announcement of the deal spurred a $6.30 (55 percent) increase in shares of Scottsdale, AZ-based RSC; shares of United Rental rose 92 cents, or 3.5 percent, to $27.95.
The deal is expected to close in the first half of 2012, pending shareholder and other approvals.
Those approvals, however, must include an anti-trust blessing from the Federal Trade Commission, which announced last week that it was moving to block a $650 million deal by Graco Corp. to take over its top competition, Illinois-based ITW Finishing.
The equipment merger will also have to undergo a solvency opinion, as United plans to finance the cash portion of the deal entirely through new debt.
Industrial Customers Cited
United, based in Greenwich, CT, said the merger would benefit industrial equipment customers in a variety of markets.
“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,” the company said in a statement.
The merger will “create a leading North American equipment rental company with a more attractive business mix, greater scale and enhanced growth prospects.”
The companies have already begun working on the transition and say they had identified more than $200 million in potential cost savings annually.
United president and CEO Michael Kneeland said the deal “marks a transformative moment in our company’s history. Combining the experience and resources of two top-performing equipment rental companies creates an exceptional company.”
|Arizona-based RSC has 4,600 employees and 452 locations across North America.|
RSC CEO and president Erik Olsson said he was “proud of what we have built” but added: “At the same time, I am confident that by partnering with United Rentals, we can accomplish far more than either company could have achieved on its own, including significant synergies.”
The companies have similar “customer-centric cultures and commitment to operational excellence,” Olsson said.
Three RSC directors will take seats on United Rentals’ current board when the deal closes. Kneeland and United Rentals chairman Jenne Britell will remain in their positions.
Each outstanding share of RSC common stock will be converted into the right to receive $10.80 in cash and 0.2783 of a share of United Rentals common stock, subject to the terms of the agreement.
United Rentals has obtained financing commitments from four lenders to cover the cash portion of the deal. The company expects its new leverage ratio “to be in line with” a previously announced target range, and to keep its current corporate credit ratings.
About the Companies
United Rentals is the world’s largest equipment rental company, with 7,500 employees and 541 rental locations in 48 states and 10 Canadian provinces. The company serves the construction, industrial, utilities, municipalities and other markets with about 2,900 classes of equipment.
RSC Holdings is the holding company for operating entity RSC Equipment Rental Inc., which serves industrial, maintenance and nonresidential construction markets in North America. RSC has 4,600 employees and 452 branch locations across 42 states in the United States and three provinces in Western Canada.