Newsletter #337 (View other news stories)
United Rentals takes private equity firm to court
GREENWICH, CT, United States
Thursday, 22 Nov 2007
United Rentals Inc has filed a lawsuit after the collapse of a planned merger with Cerberus Capital Management LP.
Forkliftaction.com News reported in July United Rentals signed an agreement to be acquired by Cerberus Capital Management LLC for USD6.6 billion (Forkliftaction.com News #320).
According to United Rentals, prior to receiving a letter from RAM Holdings Inc and RAM Acquisition Corp (collectively "RAM") announcing their intention to repudiate, Stephen A Feinburg, Cerberus CEO, had met with United Rentals representatives. Feinburg, United Rentals says, informed the rental company’s advisors that RAM did not want to "force" its financing sources to fulfil their commitments. United Rentals alleges that Cerberus also acknowledged that there had been no material adverse change in United Rentals’ business.
Hence, United Rentals is asking the Delaware Court of Chancery to compel RAM to complete the merger agreement.
United Rentals alleges the repudiation is unwarranted and is a "naked ploy" to extract a lower price for the company at the expense of its shareholders.
In its lawsuit, United Rentals contends RAM wanted to buy United Rentals for less by exploiting the dramatic stock price drop that occurred after its intention to repudiate the merger agreement was leaked to a news organisation.
United Rentals alleges RAM is acting in bad faith, directly violating the merger agreement and does not have the right to pay a reverse break-up fee and leave the agreement.
It also claims RAM’s financing sources are committed to fulfilling their contractual obligations and that the "specific performance" provision of the merger agreement requires RAM to consummate the merger.
New York law firm Orans, Elsen & Lupert LLP and the Wilmington, Delaware law firm of Rosenthal, Monhait & Goddess PA are representing United Rentals in this litigation.
The company claims to be the world’s largest equipment rental company – its annual revenues are about USD3.9 billion, it has more than 12,000 employees and USD4 billion in rental fleet in 690 locations.
Recent data shows its fleet has 73,555 forklifts, 10,445 telehandlers and 72,401 self-propelled scissors and booms.
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