United Rentals, Inc. (NYSE: URI) (“United Rentals” or “the
company”) and H&E Equipment Services, Inc. d/b/a H&E
Rentals (NASDAQ: HEES) (“H&E”) today announced their entry into
a definitive agreement under which United Rentals will acquire
H&E for $92 per share in cash, reflecting a total enterprise
value of approximately $4.8 billion, including approximately $1.4
billion of net debt.
Founded in 1961, H&E provides its customers with a
comprehensive mix of high-quality general rental fleet including
aerial work platforms, earthmoving equipment, material handling
equipment, and other general and specialty lines of equipment. With
approximately 2,900 employees and $2.9 billion of rental fleet at
original cost, the company serves a diverse mix of customers across
both construction and industrial markets through its network of
approximately 160 branches in over 30 U.S. states.
On a trailing 12-month basis through September 30, 2024, H&E
generated $696 million of adjusted EBITDA on total revenues of
$1,518 million, translating to an adjusted EBITDA margin of
approximately 45.8%.
Strong Strategic Rationale
- The transaction is consistent with United Rentals’ “grow the
core” strategy, and legacy H&E customers will benefit from
one-stop access to United Rentals’ specialty rental offerings
across Fluid Solutions, Matting Solutions, Onsite Services,
Portable Storage & Modular Space, Power & HVAC, Tool
Solutions, and Trench Safety.
- H&E’s fleet, experienced employees and customer service
footprint of branches across over 30 strategic U.S. states are
complementary with United Rentals’ existing network. Importantly,
the combination will increase capacity for United Rentals in key
U.S. geographies.
- The combination will expand United Rentals’ rental fleet by
almost 64,000 units with an original cost of over $2.9 billion and
an average age of under 41 months, as well as roughly $230 million
of non-rental fleet.
- United Rentals and H&E share many cultural attributes,
including a strong focus on safety, a customer-first business
philosophy, and best practices for talent development and
retention. Critically, H&E employees will bring a wealth of
experience to United Rentals, and will have greater opportunities
for career development within the larger combined
organization.
Strong Financial Rationale
- The purchase price of approximately $4.8 billion represents a
multiple of 6.9x adjusted EBITDA for the trailing 12 months ended
September 30, 2024, or 5.8x adjusted EBITDA including $130 million
of targeted cost synergies and the net present value of tax
attributes estimated at approximately $54 million.
- The combination is expected to generate approximately $130
million of annualized cost synergies within 24 months of closing,
primarily in the areas of corporate overhead and operations.
Additionally, United Rentals expects to realize procurement savings
of approximately 5% as compared to historical H&E pricing.
- United Rentals expects to realize approximately $120 million of
annual revenue cross-sell synergies by year three, as legacy
H&E customers take advantage of United Rentals’ specialty
rental offerings.
- The acquisition is expected to be accretive to United Rentals’
adjusted earnings per share and free cash flow generation in its
first year post-close.
- Return on invested capital (ROIC) is expected to reach the
company’s cost of capital by the end of year three on a run-rate
basis, with compelling IRR and NPV across multiple macro
scenarios.
- The transaction is projected to result in a pro forma net
leverage ratio at closing of approximately 2.3x, well within the
company’s target range of 1.5-2.5x. Upon closing, the company
intends to reduce its leverage with a goal of reaching net-debt to
EBITDA of approximately 2.0x within 12 months after acquisition
close. Accordingly, the company has paused its share repurchase
plan in anticipation of driving towards this goal.
- The integration of H&E into United Rentals’ operations
presents opportunities to improve efficiency, productivity and new
business development with the adoption of United Rentals’
operational excellence, including its technology offerings.
- The transaction is not conditioned on the availability of
financing. United Rentals has obtained bridge commitments to ensure
its ability to close the transaction as soon as possible, with the
expectation that it will use a combination of newly issued debt
and/or borrowings and existing capacity under its ABL facility to
fund the transaction and related expenses at close.
- Notably, the transaction will not impact the company’s current
dividend program.
CEO and Chairman Comments
Matthew Flannery, chief executive officer of United Rentals,
said, “In H&E we’re acquiring a well-run operation that’s
primed to benefit from our technology, operations and broad value
proposition. Most importantly, we’re gaining a great team that
shares our intense focus on safety and customer service. We’ll be
working side-by-side throughout the integration to capitalize on
best-in-class expertise from both sides. We will use our well-honed
integration playbook as we prepare the acquired branches to take
full advantage of our systems and operational capabilities, and
gain from our employee and customer-centric culture. I look forward
to welcoming our new team members upon the closing of the
acquisition.”
Flannery continued, “This purchase of H&E supports our
strategy to deploy capital to grow the core business and drive
shareholder value. This acquisition allows us to better serve our
customers with expanded capacity in key markets while also
providing the opportunity to further drive revenue through our
proven cross-selling strategy. Not only does the agreement satisfy
the rigorous strategic, financial and cultural standards we set for
acquisitions, but it also drives attractive returns for our
shareholders.”
Bradley W. Barber, chief executive officer of H&E, said,
“I’m extremely proud of what we’ve built at H&E over the last
60 years and am confident that our combination with United Rentals
will take the business to new heights going forward.”
John M. Engquist, Executive Chairman of H&E, added, “I
couldn’t be more pleased with this win-win outcome for both
organizations, our customers and our shareholders. Importantly, I
want to thank our employees for driving the results that made this
transaction possible. I am confident that we’ve found an excellent
landing spot for them and I am excited for the new opportunities
they will have as part of United Rentals.”
Transaction Details
The boards of directors of United Rentals and H&E
unanimously approved the transaction, which is subject to customary
closing conditions, including a minimum tender of at least a
majority of then-outstanding H&E common shares and the
expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. United Rentals intends to
commence a tender offer by January 28, 2025 to acquire all of the
outstanding shares of H&E common stock for $92 per share in
cash. Following completion of the tender offer, United Rentals will
acquire all remaining shares not tendered in the offer through a
second-step merger at the same price as in the tender offer. The
transaction is expected to close in the first quarter of 2025. The
company plans to update its 2025 financial outlook to reflect the
combined operations following the completion of the
transaction.
The merger agreement includes a 35-day “go-shop” period which
runs through February 17, 2025, during which H&E—with the
assistance of BofA Securities, its exclusive financial advisor—will
actively solicit, evaluate and potentially enter into negotiations
with, and provide due diligence access to, parties that submit
alternative proposals. H&E will have the right to terminate the
merger agreement to accept a superior proposal subject to the
conditions and procedures specified in the merger agreement, which
H&E will file with a Current Report on Form 8-K. There can be
no assurance that this 35-day “go shop” will result in a superior
proposal, and H&E does not intend to disclose developments with
respect to the solicitation process unless and until its board of
directors makes a determination requiring further disclosure.
Advisors
Sullivan & Cromwell acted as the company’s legal advisor.
Morgan Stanley Senior Funding, Inc. and Wells Fargo have provided
committed bridge financing. BofA Securities acted as financial
advisor to H&E and Milbank LLP acted as
H&E's legal advisor.
Non-GAAP Measures
H&E’s adjusted EBITDA is a non-GAAP financial measure as
defined under the rules of the Securities and Exchange Commission.
United Rentals and H&E believe that this non-GAAP financial
measure provides useful information about the proposed transaction;
however, it should not be considered as an alternative to GAAP net
income. A reconciliation between H&E’s adjusted EBITDA and GAAP
net income is provided in the investor presentation available on
United Rentals’ website.
Conference Call
United Rentals will hold a conference call today, Tuesday,
January 14, 2025, at 8:30 a.m. Eastern Time. The conference
call number is 800-420-1271 (international: 785-424-1634). The
replay number for the call is 402-220-6985. The passcode for both
the conference call and replay is 73193. The conference call will
also be available live by audio webcast at unitedrentals.com.
About United Rentals
United Rentals, Inc. is the largest equipment rental company in
the world. The company has an integrated network of 1,571 rental
locations in North America, 39 in Europe, 37 in Australia and 19 in
New Zealand. In North America, the company operates in 49 states
and every Canadian province. The company’s approximately 27,550
employees serve construction and industrial customers, utilities,
municipalities, homeowners and others. The company offers
approximately 5,000 classes of equipment for rent with a total
original cost of $21.85 billion. United Rentals is a member of the
Standard & Poor’s 500 Index, the Barron’s 400 Index and the
Russell 3000 Index® and is headquartered in Stamford, Conn.
Additional information about United Rentals is available
at unitedrentals.com.
About H&E Equipment Services, Inc.
Founded in 1961, H&E is one of the largest rental equipment
companies in the nation. The Company’s fleet is comprised of aerial
work platforms, earthmoving, material handling, and other general
and specialty lines. H&E serves a diverse set of end markets in
many high-growth geographies and has branches throughout
the Pacific Northwest, West Coast, Intermountain,
Southwest, Gulf Coast, Southeast, Midwest and Mid-Atlantic
regions.
Cautionary Statement Regarding Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and the Private Securities Litigation Reform Act of
1995, known as the PSLRA. Forward-looking statements involve
significant risks and uncertainties that may cause actual results
to differ materially from such forward-looking statements. These
statements are based on current plans, estimates and projections,
and, therefore, you should not place undue reliance on them. No
forward-looking statement, including any such statement concerning
the completion and anticipated benefits of the proposed
transaction, can be guaranteed, and actual results may differ
materially from those projected. Forward-looking statements are not
historical facts, but rather are based on current expectations,
estimates, assumptions and projections about the business and
future financial results of the equipment rental industries, and
other legal, regulatory and economic developments. United Rentals
and H&E use words such as “anticipates,” “believes,” “plans,”
“expects,” “projects,” “future,” “intends,” “may,” “will,”
“should,” “could,” “estimates,” “predicts,” “targets,” “potential,”
“continue,” “guidance” and similar expressions to identify these
forward-looking statements that are intended to be covered by the
safe harbor provisions of the PSLRA. Actual results could differ
materially from the results contemplated by these forward-looking
statements due to a number of factors, including, but not limited
to, those described in the SEC reports filed by United Rentals and
H&E, as well as the possibility that (1) United Rentals may be
unable to obtain regulatory approvals required for the proposed
transaction or may be required to accept conditions that could
reduce the anticipated benefits of the acquisition as a condition
to obtaining regulatory approvals; (2) the length of time necessary
to consummate the proposed transaction may be longer than
anticipated; (3) problems may arise in successfully integrating the
businesses of United Rentals and H&E, including, without
limitation, problems associated with the potential loss of any key
employees of H&E; (4) the proposed transaction may involve
unexpected costs, including, without limitation, the exposure to
any unrecorded liabilities or unidentified issues that we failed to
discover during the due diligence investigation of H&E or that
are not covered by insurance, as well as potential unfavorable
accounting treatment and unexpected increases in taxes; (5) our
businesses may suffer as a result of uncertainty surrounding the
proposed transaction or any adverse effects on our ability to
maintain relationships with customers, employees and suppliers; (6)
the occurrence of any event, change or other circumstances that
could give rise to the termination of the merger agreement, the
failure of the closing conditions included in the merger agreement
to be satisfied, or any other failure to consummate the proposed
transaction; (7) any negative effects of the announcement of the
proposed transaction or the financing thereof on the market price
of United Rentals or H&E common stock or other securities; and
(8) the industry may be subject to future risks that are described
in the “Risk Factors” section of the Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and other documents filed from time
to time with the SEC by United Rentals and H&E. United Rentals
and H&E give no assurance that they will achieve their
expectations and do not assume any responsibility for the accuracy
and completeness of the forward-looking statements. The
forward-looking statements speak only as of the date hereof. United
Rentals and H&E undertake no obligation to publicly update or
revise any forward-looking statement, whether as a result of new
information, future events or otherwise, except as may be required
by applicable securities laws.
The foregoing list of factors is not exhaustive. You should
carefully consider the foregoing factors and the other risks and
uncertainties that affect the businesses of United Rentals and
H&E described in the “Risk Factors” section of the Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and other
documents filed from time to time with the SEC by United Rentals
and H&E.
Additional Information and Where to Find It
This press release is for informational purposes only and is not
intended to be a recommendation to buy, sell or hold securities and
does not constitute an offer for the sale of, or the solicitation
of an offer to buy securities in any jurisdiction, including the
United States. Any such offer will only be made by means of a
prospectus or offering memorandum, and in compliance with
applicable securities laws. This press release is for informational
purposes only and is neither an offer to purchase nor a
solicitation of an offer to sell securities. The tender offer
described in this press release has not commenced. At the time the
tender offer is commenced, United Rentals will file, or will cause
to be filed, tender offer materials on Schedule TO with the SEC and
H&E will file a Solicitation/Recommendation Statement on
Schedule 14D-9 with the SEC, in each case with respect to the
tender offer. The tender offer materials (including an offer to
purchase, a related letter of transmittal and other offer
documents) and the solicitation/recommendation statement, as they
may be amended from time to time, will contain important
information that should be read carefully when they become
available and considered before any decision is made with respect
to the tender offer. Those materials and all other documents filed
by, or caused to be filed by, United Rentals and H&E with the
SEC will be available at no charge on the SEC’s website at
www.sec.gov. The tender offer materials and related materials also
may be obtained for free (when available) under the “Financials—SEC
Filings” section of United Rentals’ investor website at
https://investors.unitedrentals.com/, and the
Solicitation/Recommendation Statement and such other documents also
may be obtained for free (when available) from H&E under the
“Financial Information—SEC Filings” section of its investor website
at https://investor.he-equipment.com/.
Contact:
United Rentals, Inc.Elizabeth GrenfellVice
President, Investor RelationsO: (203) 618-7125investors@ur.com
H&E Equipment Services, Inc.Leslie S.
MageeChief Financial Officer225-298-5261lmagee@he-equipment.com
Jeffrey L. ChastainVice President of Investor
Relations225-952-2308jchastain@he-equipment.com
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