Speedy, U.K.’s Top Tool Rental Company, Buys Top Competitor Hewden Tools

In a single stunning day last week, two major deals involving three of the United Kindom’s biggest rental companies redesigned the equipment rental roadmap in one of the world’s most evolved rental markets.

Speedy Hire plc announced June 14 that it acquired the tool rental business and assets of Hewden Stuart plc from Vancouver, B.C., Canada-based Finning International, the world’s largest Caterpillar dealer. Finning retains Hewden Plant Hire, the largest heavy equipment rental company in the U.K.

On the same day, Archie Norman, a retail entrepreneur and former Conservative Member of Parliament and his private equity fund, in partnership with a U.S.-based private equity fund, acquired HSS Tool Hire, believed to be the third-largest tool hire chain in the U.K. (see following story).

Speedy Hire plc agreed to buy Hewden Tools for £115 million (about U.S. $227 million), boosting its branch total from 352 to 540 and significantly adding to its fleet, featuring a wide tool range, scaffolding, aerial equipment, generators and other light contractor items. About 400 of the facilities will be devoted to tool rental.

Speedy, based in Newton-le-Willows in northwest England, will boost its annual revenue by at least 20 percent to more than £400 million, according to Speedy chief executive Steve Corcoran. Speedy gets more than two-thirds of its volume from construction.

With the acquisition, proposed to complete July 31, Speedy acquires its largest competitor, which rental revenues of £89.8 million in 2006 (about U.S. $177.3), including the sale of consumable items. The acquisition boosts Speedy’s market share from about 7.5 percent to about 10 percent and makes the company about twice the size of its nearest competitor HSS.

British analysts lauded the deal and shares of Speedy rose 2.8 percent after the announcement. Speedy’s stock has grown close to 6 percent so far this year.

“This is a transformational acquisition for Speedy Hire, which is consistent with our strategy of growing the business organically and through acquisition,” said Corcoran, who called the acquisition “an excellent strategic and cultural fit. It brings with it 1,200 highly experienced people … operating a similar business model to our own in a closely related area of the market. The transaction enables us to consolidate our position as No. 1 in the U.K. hire market, enlarge our customer base and create further cross-selling opportunities. It also improves our customer service capability through having a significantly enlarged depot network.”

For Finning, the divestment allows Hewden to focus on the heavy-equipment business. “Narrowing Hewden’s business lines will allow us to focus our financial and management resources on those areas most closely associated with our Caterpillar-related core strengths,” said Finning president and CEO Doug Whitehead. “This transaction is the second significant sale of a portion of our U.K. operations in the last year.”

The sale of Hewden’s tool division, along with its material-handling division it sold to Briggs Equipment last year, brought it about U.S. $470 million, which it plans to use, initially, to repay short-term debt.

Whitehead added that Finning remains committed to Hewden’s equipment rentals as well as its Caterpillar dealership. Hewden will operate 128 locations in the U.K. Andy Fraser, managing director of Finning’s U.K. group, said Hewden will remain the U.K.’s biggest construction equipment rental player, with more than 6,000 Caterpillar machines in its fleet along with a range of allied equipment.

Speedy will spend about £10 million this year to close about 24 depots and transferr its new Hewden branches to Speedy’s operating system. Corcoran said by the end of this year, Hewden Tools will be re-branded as Speedy, and that the combined companies will make £20 million in cost savings by March 2010. Speedy plans to fund the acquisition through new debt facilities of £325 million.

The acquisition must still be approved by regulatory agencies, and approval for share placing is scheduled at Speedy’s shareholder meeting July 17.