The self-described largest equipment rental company in the world may boost leverage in acquiring forklifts and work platforms after it acquires RSC Holdings Inc.
Greenwich-based United Rentals Inc has agreed to buy RSC of Scottsdale, Arizona for about USD1.87 billion in cash and stock and assumption of USD2.3 billion in net debt. Shareholders and regulators must approve the definitive merger agreement.
The offer price represents a 58% premium over the closing price of RSC common stock on 15 December.
United Rentals expects the combination to accelerate its growth with industrial customers and provide both a lower cost base and a less volatile revenue profile.
"This transaction marks a transformative moment in our company's history," says Michael Kneeland, president and chief executive officer of United Rentals. "Combining the experience and resources of two top performing equipment rental companies creates an exceptional company."
Kneeland and Jenne Britell, United Rentals' chairman, would remain in their positions at the combined company.
Erik Olsson, RSC's CEO and president, says his firm has a strong track record of profitable growth and, by partnering with United Rentals, "can accomplish far more than either company could have achieved on its own, including significant synergies". Olsson is not expected to remain.
United Rentals has 531 rental branches in the US and Canada - down from 697 in 2007 - and operates a rental equipment fleet of more than 210,000 units including general construction and industrial equipment such as backhoes, skid-steer loaders, forklifts, earthmoving equipment and materials handling equipment; aerial work platforms such as boom lifts and scissor lifts; and trench safety equipment, according to a 1 February security filing.
United Rentals refers to the branch reduction as "the continued optimisation of our network of rental locations". Rental revenue in 2010 was USD1.8 billion out of total company sales of USD2.2 billion.
RSC has 4,427 employees, 454 locations under the RSC Equipment Rental identity and a rental fleet covering more than 900 categories of equipment. The 2010 rental revenues were USD1.06 billion of the company's total sales of USD1.23 billion. Aerial work platform booms account for 31.5% of the RSC rental fleet, and forklifts for 21.8%.
During 2010, RSC purchased new rental equipment for USD327.1 million with major providers including suppliers of the JLG, Skyjack, Bobcat and John Deere brands.
Broad-based competitors for United Rentals and RSC in the US market include Hertz Equipment Rental Corp (HERC) and Sunbelt Rentals.
HERC of Park Ridge, New Jersey had 2010 rental revenues of USD1.07 billion from 322 locations - including 248 in the US and Canada. HERC parent firm Hertz Corp had sales of USD7.56 billion.
Sunbelt Rentals of Fort Mill, South Carolina had rental revenues of USD1.22 billion for the fiscal year ended 30 April and was utilising equipment inventory worth more than USD2.0 billion at locations in 34 states and the District of Columbia. Sunbelt Rentals is a wholly owned subsidiary of London-based Ashtead Group plc.