BATON ROUGE, La. — H&E Equipment Services recently announced a definitive agreement to acquire J.W. Burress, a privately owned construction equipment distributor serving the mid-Atlantic markets out of 12 locations, with headquarters in Roanoke, Va. The acquisition is subject to the completion of Burress' 2006 audit, obtaining third-party consents from certain equipment manufacturers and vendors, receipt of financing, closing of the acquisition no later than July 31, and other customary closing conditions.
The sale of new and used equipment accounts for about 60 percent of the company's revenues. Burress represents, among others, Diamond Z, Doosan, Hitachi, Manitowoc, Grove and Terex. H&E said it does not anticipate continuing to represent Hitachi, and therefore the acquisition is not conditioned on continuing the Hitachi distributorship. However, H&E believes it will be able to expand and grow its relationship with other manufacturers that currently do business with Burress as well as other manufacturers that have had discussions with it.
The estimated purchase price without Hitachi representation would be about $108.7 million, subject to adjustments, plus about $4 million in assumed debt. An additional $12.9 million would be added to the transaction if Burress continues to represent Hitachi. Burress had unaudited revenues of about $178 million in 2006, with the sale, rental and service of Hitachi products accounting for about 28 percent. The company expects the deal to be accretive to 2007 results.
“Burress is one of the premier distributors of heavy construction equipment in the U.S., and has an outstanding reputation with the manufacturers they represent and the end users they serve,” said John Engquist, president and CEO of H&E. “This acquisition will expand our footprint contiguously throughout the mid-Atlantic region and affords us significant growth opportunities. Our ideal acquisition target is a distributor with strong retail sales and product support capabilities and a rental component that we can improve and grow significantly. Burress certainly fits this profile.”
H&E recently announced solid first-quarter profits, with a 15.1-percent total revenue increase, posting $209.7 million compared with $182.2 in its first quarter last year.
Equipment rental revenues were $63.2 million, up from $54 million in the first quarter of 2006, a 17-percent rental volume increase. At the end of the first quarter, the original acquisition cost of the rental fleet was $653 million, up 52.5 percent from $600.5 million at the end of Q106, including fleet acquired through the acquisition of Eagle High Reach. Gross profit from equipment rentals was $31.1 million, compared to $26.5 million in the first quarter of 2006.
Based in Baton Rouge, La., H&E Equipment Services is No. 9 on the RER 100.
MISSISSAUGA, Ontario — Stephenson's Rental Services Income Fund and a fund managed by EdgeStone Capital Partners announced a support agreement under which EdgeStone has agreed to offer to acquire Stephenson's stock for $6.875 per unit.
Stephenson's board of trustees has unanimously approved the agreement and has unanimously recommended that unitholders tender their units to the offer. Stephenson's financial advisor Scotia Bank has also agreed that the offer is in the best interests of unitholders.
“The transaction announced today represents the best outcome resulting from the strategic review process that [Stephenson's] initiated to maximize unitholder value,” said board chairman Warren Walker. “This process included an extensive review of all of our alternatives to maximize unitholder value including, among other things, the undertaking of an extensive auction process.”
The offer represents a premium of about 30 percent to the closing price of the value of the units on January 4, 2007, the day prior to the company's commencement of the strategic review process.
“As a publicly traded income trust, Stephenson's was constrained from aggressively pursuing all of the growth opportunities available to us,” said Stephenson's president and CEO Willie Swisher. “We are excited to be able to partner with EdgeStone, which has the strategic vision, business operating experience, and capital to support our long-term growth strategy.”
“Stephenson's is the clear market leader in equipment rental in Toronto and surrounding areas, operating an extensive branch network with unparalleled product offerings and service levels, and tremendous customer satisfaction and loyalty,” said Gilbert Palter, chief investment officer and managing partner of Edgestone. “Stephenson's is very well positioned to benefit from the ongoing trend of renting versus owning construction and related equipment.”
Sandra Bosela, also an EdgeStone partner, added, “We look forward to helping Stephenson's capitalize on the many growth opportunities it will now be positioned to pursue, as well as continuing to offer the superior product offerings and customer service for which Stephenson's is known.”
The offer will also be subject to customary regulatory approvals and the absence of any adverse litigation.
For the three months ended March 31, Stephenson's Rental Services posted a 35-percent revenue increase, grossing CA $13.5 million (about U.S. $12.3 million). Stephenson's officials credited the increase to the return of normal weather patterns and the contribution from the acquisition of A-1 Equipment Rental in May 2006.
EBITDA for the first quarter jumped 89.1 percent to $2.3 million or 16.9 percent of revenue compared with $1.2 million or 12.1 percent of revenue for the same period in 2006. Rental volume grew 30.5 percent year over year, from $7.6 million in Q106 to $9.9 million this year.
Based in Mississauga, Ontario, Stephenson's Rental Services is No. 40 on the RER 100, and has 18 branches in the greater Toronto area.
