In one of the largest deals in rental industry history, Sunbelt Rentals announced today it will acquire Fort Lauderdale, Fla.-based NationsRent in a $1.05 billion transaction.
The merger of Charlotte, N.C.-based Sunbelt Rentals, No. 4 on the RER 100, with No. 6 NationsRent, will make the combined company the third-largest rental company in North America. The two companies had a combined 2005 rental volume of $1.23 billion, higher than third-ranked Hertz Equipment Rental Corp.’s estimated $1.14 billion, although HERC posted an estimated $1.57 billion in total revenue compared with Sunbelt and NationsRent’s combined $1.53 billion.
The combined companies will have 477 locations in 35 states, with about 7,000 employees.
Sunbelt is paying about $600 million in cash and bond redemptions for NationsRent in addition to taking on about $400 million of debt. The deal is expected to close around the end of August, subject to approval by Asthead shareholders and the consummation of financing arrangements, including a rights offering, along with customary governmental approvals. NationsRent CEO Jeff Putman said NationsRent’s board of directors voted unanimously in favor of the merger.
“NationsRent is a high-quality company which, like Sunbelt, has an attractive and significant exposure to the growing non-residential construction market in the U.S.,” said George Burnett, CEO of Ashtead plc, Sunbelt’s United Kingdom-based parent company. “The merger of NationsRent with Sunbelt uniquely creates a chain of 477 outlets with minimal overlap and accelerates our ‘clustering’ strategy that has delivered consistent profitable growth over the past few years. NationsRent and Sunbelt have similar rental fleets both in age and in mix and through the combination of these businesses we believe we will enjoy benefits of scale in both customer service and buying power.”
The merger extends the reach of the combined companies to eight additional states, with NationsRent branches in Colorado, Louisiana and some New England states being added to the Sunbelt network.
“Since there are very few overlapping branch locations, there will be plenty of growth opportunities for branch network employees of both companies as the combined company works to serve its expanded customer base,” said Sunbelt CEO and president Cliff Miller. “The two companies also have very different specialty operations, which are complementary rather than redundant, such as NationsRent’s Lowe’s retail-based program and its expanding dealership network along with Sunbelt’s pump, power and scaffolding operations. By adding NationsRent’s relatively new rental fleet to Sunbelt’s already significant investment in fleet, the combined company will feature a rental fleet base of approximately $2.2 billion of original cost. The primary beneficiaries of this combination will be the customers of Sunbelt and NationsRent as well as employees who have worked so hard to build both organizations.”
NationsRent CEO Jeff Putman added that the acquisition will provide NationsRent employees with “an opportunity for career growth in one of the largest and most successful companies in our industry. For the stockholders of NationsRent, the transaction will allow them to realize an attractive return generated by the growth of our company over the past three years.”
Support operations will mainly be consolidated at Sunbelt’s Charlotte headquarters and staffing will be evaluated to reduce duplication and improve efficiency. NationsRent senior executives Bryan Rich and Charles Snyder have agreed to join the Sunbelt executive management team.
Sunbelt will pay $495 million cash for the outstanding shares of NationsRent common stock, less transaction expenses incurred by NationsRent. NationsRent common stockholders may receive additional payments from a $28 million escrow account remaining after settlement of any indemnification claims, the remainder of a $5 million reserve account established to cover the costs of disputed claims, and a common stock deferred payment of up to $89 million. The deferred payment is payable in full if Ashtead’s share price equals or exceeds 150 percent of an agreed upon “reference price” of 223.5 pence until the third anniversary of the closing date of the merger. Also each outstanding share of NationsRent preferred stock will entitle the holder to receive $1,000 for an aggregate of $72 million.
In connection with the merger, NationsRent will tender an offer to purchase for cash any and all of its outstanding 9 1/2 percent senior notes due May 1, 2015, in an aggregate principal amount of $150 million and 9 ½ percent senior secured notes due Oct. 15, 2010 in an aggregate principal amount of $250 million.
Ashtead is raising 150 million pounds (about U.S. $274 million) through an underwritten three-for-eight rights issue at 100 pence per share.
UBS and JP Morgan are acting as financial advisers to Ashtead in relation to the acquisition. Stroock & Stroock & Lavan served as lead counsel to NationsRent.