United Rentals, Inc. (NYSE: URI) and RSC Holdings, Inc. (NYSE: RRR) entered into a definitive merger agreement under which United Rentals will acquire RSC in a cash-and-stock transaction valued at $4.2 billion, including $2.3 billion of net debt. Both boards of directors unanimously approved the proposed transaction and recommended that their respective stockholders also approve it.
The transaction will be financed with 60% cash and 40% stock. Each outstanding share of RSC common stock will be converted into the right to receive $10.80 in cash and 0.2783 of United Rentals share. United will issue new debt and draw on current loan facilities to finance the cash portion. Once completed, the company will be 70% owned by United Rentals shareholders.
United estimates synergies from combining the companies of over $200 million annually, which they expect to realize within the first two years.
Combining the companies 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.
Michael Kneeland, President and Chief Executive Officer of United Rentals said, “This transaction 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. The new United Rentals will build upon the best practices and management teams from both companies to deliver superior customer benefits and enhanced value for our stockholders. With the best talent in the industry, we have a tremendous opportunity to become the supplier of choice for customers throughout North America.”
Erik Olsson, RSC’s Chief Executive Officer and President, said, “RSC has a strong track record of profitable growth and we are proud of what we have built. 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. As a result, the transaction delivers significant value to our shareholders. Our similar customer-centric cultures and commitment to operational excellence will provide even greater value to our customers and facilitate a smooth integration. I look forward to helping to lead the integration process during a transition period.”
Upon the close of the transaction, three of RSC’s independent directors will receive seats on United Rentals’ existing Board of Directors.
Michael Kneeland, President and Chief Executive Officer of United Rentals, and Jenne Britell, United Rentals’ Chairman, will remain in their positions at the combined company.
Upon the closing of the transaction, 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 and conditions of the merger agreement.