United Rentals to Acquire Pump Rental Giant National Pump

March 10, 2014

United Rentals has entered into a definitive asset purchase agreement to acquire National Pump, the second largest specialty pump rental company in North America. Under the terms of the agreement, United Rentals will also acquire GulfCo., a two-branch general rental business also based in Texas. The combined purchase price for the assets is about $780 million. The board of directors of United Rentals and the partners of National Pump unanimously approved the proposed transaction.

         With the acquisition of National Pump, United Rentals becomes a major player in the pump rental segment, one of the largest and fastest-growing specialty markets. The company has been executing its strategy of expanding its specialty rental businesses, and this acquisition provides another significant product line with strong margins and returns. About half of National Pump’s revenue is in the oil-and-gas market.

         Nation Pump is the pump portion of Beaumont, Texas-based National Pump & Compressor. United Rentals is not acquiring the compressor portion of the business.

         “This transaction is an important step in our strategy to create a company that delivers strong financial returns through the cycle,” said United Rentals president and CEO Michael Kneeland. “We have been executing against a plan to strengthen and diversify our business, as demonstrated by our 18 specialty cold starts in 2013 and 13 planned for 2014. National Pump provides an attractive new specialty offering which increases our penetration in growing end markets and advances over time our financial goals of delivering strong free cash flow and improved returns.

         “Loddie Naymola and his team have done an outstanding job of building National Pump into the number two pump rental player and the leading provider to the oil-and-gas end market. We are pleased that key members of the senior management team are joining United Rentals and remain committed to growing the business. We see tremendous opportunities for National Pump and are eager to apply our standards for operating excellence, financial resources, and scale advantages to help National Pump realize its full potential.”

           National Pump was founded in 2007 and has grown at more than 50 percent annually from 2010 to 2013. The acquired assets recorded last-12-month revenue of $211 million and adjusted EBITDA of $103 million, representing an adjusted EBITDA margin of 49 percent on a fleet with an original equipment cost of $215 million.

           National Pump is a leading supplier of pumps for energy and petrochemical customers, with upstream oil and gas customers representing about 50 percent of its revenue. National Pump has grown revenue through a combination of new locations and a differentiated customer service offering, including customized pump configurations, customer support, specialized training, and a strong safety record.

          National Pump has 35 branches, including four facilities in western Canada. National will become part of the United Rentals Specialty division, led by Paul McDonnell, senior vice president of specialty rentals.

          “We have worked with National Pump management to develop a plan to double the size of our new pump business within five years, and we are ready to implement it,” said McDonnell.

           The deal calls for United Rentals to acquire NP for a purchase price of $780 million -- $7654 million in cash and $15 million in stock. The transaction structure provides for additional cash consideration based on achievement of certain financial targets, up to a maximum of $75 million if last-12-month adjusted EBITDA reaches $134 million 12 months post-closing and an additional $50 million if LTM-adjusted EBITDA reaches $161 million 18 months post-closing.

         The transaction will increase United Rentals’ leverage by a slight 0.2x. However, leverage is expected to decline to about 2.9x by year end compared to 3.0x at the end of 2013.

         Subject to customary closing conditions and regulatory approvals, United Rentals expects the transaction to close early in the second quarter.

         United Rentals is updating its 2014 revenue expectation to the range of $5.45 billion to $5.65 billion.

         Based in Stamford, Conn., United Rentals is No. 1 on the RER 100.