A day after announcing its acquisition of the off-highway hauler business from Terex Corp., the Volvo Group has agreed to sell Volvo Rents to United States private equity firm Platinum Equity for approximately $1.104 billion. At closing, net financial debt in the Volvo Group’s Industrial Operation is expected to be reduced by the same amount. The sale is part of Volvo’s strategic effort to focus on its core business.
The transaction is expected to have a negative impact on Volvo Group’s operating income of approximately SEK 1.5 billion (U.S. $230 million) in the fourth quarter of 2013.
A pre-requisite for completion of the transaction is that Platinum Equity is successful in a debt offering to be made to finance its acquisition. Volvo CE will continue to sell products to Volvo Rents under the new ownership.
“We looked at different alternatives to grow Volvo Rents’ business and concluded that the best alternative is to sell the operation to another owner,” said Olof Persson, Volvo Group president and CEO. “Volvo Rents’ business does not have a sufficiently strong connection with the group’s core operation to motivate continued ownership.”
The transaction is expected to be closed in the first quarter of 2014. The sale of Volvo Rents is expected to decrease the net financial debt for Volvo’s Industrial Operation by U.S. $1.1 billion.
Volvo Rents, formed in 2001, offers rental of a comprehensive range of construction machines, including Volvo CE products. Volvo Rents has operations in the U.S., Canada and Puerto Rico and has about 2,100 employees with about 130 branches. In the first nine months of 2013 Volvo Rents had net sales of about U.S. $475.4 million and recorded an operating loss of SEK 47 million (U.S. $7.2 million). Volvo Rents reported $333 million in 2012 rental volume.
Platinum Equity is a California-based global investment firm with a highly specialized focus on business operations. The firm has significant experience investing in companies that serve the construction, commercial and industrial equipment rental market. Platinum Equity also owns Bridgeville, Pa.-based Maxim Cranes, No. 9 on the RER 100, which it acquired in July 2008, and Bluffton, Ind.-based NESCO Sales & Rentals, which it acquired in Oct. 2011. Platinum Equity also acquired a 65-percent stake in Caterpillar Logistics Services in May 2012.
All of Volvo Rents’ employees will remain with the company as it is sold, Volvo Rents said. Volvo Rents’ customers will not be affected by the transaction, and Volvo CE will continue to sell products to Volvo Rents under the new ownership.
Completion of the transaction is subject to certain conditions, including the approval of relevant authorities.
Shippensburg, Pa.-based Volvo Rents is No. 7 on the RER 100.