United Rentals Inc. finalized its $4.2 billion in cash-and-stock purchase of RSC Holdings Inc. on April 30. The deal—first announced in December—includes $2.3 billion in assumed net debt. It is believed to be the largest equipment-rental company merger in history. In part due to the significance of the deal, company executives say they are weighing a possible name change.
The purchase received 83% shareholder approval. The deal gives RSC shareholders $10.80 in cash per share and 0.2783 of a share of United common stock in exchange for their shares. RSC, as a result, will have a 30% ownership of the combined company, plus three newly created positions on United's 11-member board.
In conjunction with the closing, RSC's Matt Flannery has been named executive vice president and chief operating officer of the combined company. He will oversee the RSC merger process, which entails integrating 4,700 employees in 446 rental locations across 43 states and three Canadian provinces. The consolidation will shutter between 50 and 100 branches, saving an estimated $200 million in annual operating expenses.
The merger creates a rental juggernaut: Its 15% market share is three times the size of the next-closest competitors, Sunbelt and Hertz, says Nicholas Coppola, an analyst with Thompson Research Group (ENR 4/9 p. 20). RSC had $1.52 billion in revenue in 2011, or 23.3% more than in 2010, while United had $2.61 billion in revenue for a 16.7% increase over the previous year. United was ranked as the nation's top rental company in 2011, according to Rental Equipment Register magazine, with RSC as a close runner-up.
The merger boosts United's industrial revenue to 35% from 15% of sales, which is a key component of its long-term strategy since industrial projects typically last longer, making them less susceptible to the boom-and-bust realities of other markets.
Meanwhile, United plans to buy back $200 million of its common stock while implementing an across-the-board 5% rental rate increase in 2012. RSC represents the largest acquisition in United's 15-year history.