In a blockbuster deal, H&E Equipment Services and Neff Corp. have entered into a definitive merger agreement under which H&E will acquire Neff Corp. H&E will pay $21.07 in cash per share of Neff common stock for a total enterprise value of about $1.2 billion, including approximately $690 million of net debt. The agreement has been unanimously approved by the boards of directors of both companies.

The acquisition is one of the largest in the history of the equipment rental industry. In late 2011, United Rentals acquired RSC Rental for about $1.9 billion. In August 2006, Sunbelt Rentals acquired NationsRent for $1.05 billion. Last year, funds managed by affiliates of Apollo Global Management acquired AmQuip Crane Rental and Maxim Crane Works, folding both firms under the Maxim Crane umbrella.

The per share merger consideration payable to Neff stockholders is subject to certain downward adjustments, not to exceed $0.44 per share, in the event that H&E incurs certain increased financing costs if the transaction is not consummated on or before Jan. 14, 2018. The transaction is expected to close in the late third quarter or early fourth quarter of 2017, and is subject to customary closing conditions and anti-trust clearance.

“This agreement accelerates our stated strategy to expand our footprint across the United States as we seek to penetrate and grow our business in strategic business segments,” said John Engquist, H&E Equipment Services CEO. “Further, this transaction will bring together what we believe to be two highly complementary businesses that share a commitment to addressing the increasingly complex equipment needs of our customers. Our broader geographic footprint and enhanced capabilities in strategic markets, coupled with complementary expertise across equipment categories, are expected to help us to achieve our growth goals.”

“We are looking forward to joining an industry leader who shares our core values, including our commitment to providing customers with best-in-class equipment services and solutions. Neff offers H&E a talented, experienced and knowledgeable employee base that we expect will continue to maintain and develop relationships with key customers and contribute to the combined company’s growth. I would like to thank our 1,160 employees across the country, who are the driving force behind our business.”

The acquisition will nearly double H&E’s branch footprint from 78 to 147, within H&E’s existing footprint in the strategically important Gulf Coast, Mid-Atlantic, Southeast and West Coast regions. The combined companies fleet totaled $2.2 billion based on original equipment cost at the end of the first quarter, consisting of 43,749 units. The addition of Neff’s fleet will be highly complementary to H&E’s concentration in aerial work platform equipment and the combined company will have one of the largest earthmoving rental fleets in the industry, with Neff’s fleet heavily focused on earthmoving. As of March 31, the earthmoving fleet of H&E and Neff on a combined OEC basis totaled $727 million and consisted of 8,736 units.

The increased geographic expansion and density is expected to allow H&E to better position fleet to regional pockets of higher demand and improve overall utilization. The transaction is expected to increase H&E’s penetration in the non-residential construction market. With a much larger earthmoving fleet, H&E will be well-positioned to gain from any future governmental infrastructure spending initiatives, the company said, and will have a broader exposure to new regional and local customers in the construction markets generally. H&E believes that the earthmoving segment is an under-penetrated segment that may afford enhanced growth opportunities.

H&E estimates the acquisition will create $25 to $30 million of synergies annually related to corporate overhead, systems and operational efficiencies, as well as scale benefits for equipment purchases. The acquisition of Neff is expected to generate more than $800 million of gross tax assets for H&E arising from a step-up in the basis of certain of Neff’s assets.

Wells Fargo Bank and affiliated entities have agreed to provide committed financing for the transaction, subject to customary conditions. The transaction is not subject to a financing condition.

Private investment funds managed by Wayzata Investment Partners LLC holding approximately 62.7 percent of the outstanding common shares of Neff have executed a written consent to approve the transaction, thereby providing the required stockholder approval for the deal.

The merger agreement includes a “go-shop” period through Aug. 20, during which the special committee of Neff’s board of directors, with the assistance of its financial and legal advisors, may solicit alternative proposals to acquire Neff.

H&E Equipment Services, based in Baton Rouge, La., is No. 9 on the RER 100. The company posted $445.2 million in rental revenue in 2016, and $978.1 million in total volume, focusing on aerial work platforms, cranes, earthmoving equipment and industrial lift trucks. It has 78 U.S. branches.

Neff Rental, with 69 branches, is No. 10 on the RER 100. It reported $360.1 million in rental volume in 2016, and $397 million in total revenue.

Combined the two companies posted $805.3 million in rental revenue in 2016, which would make it the fourth largest rental company in North America behind United Rentals, Sunbelt Rentals and Herc Rentals. In total volume, the two companies combined for $1,375.1 million.

As of this writing, Neff Corp. (NEFF) was trading at $20.87 per share, while H&E Equipment Services (HEES) was trading at $21.76.