CHICAGO — Chicago-based NES Rentals last month announced that it has retained Bear, Stearns & Co. as the company's financial adviser to review strategic alternatives, which could include sale of the company, merger, acquisition or other transaction.

“Bear Stearns will be working with us to find new permanent investors for our company,” NES CEO Andrew Studdert told RER. “The reason we can do it now is that the company's performance has been extraordinary. We went from an EBIT loss of $31 million in 2004, to an estimated $35 million EBIT gain in 2005.”

While acknowledging the strong market has played a role in NES' turnaround, Studdert also credited the company's internal improvement.

“We've done what we said we were going to do,” he said. “We have operationalized the company; we brought in new disciplines in the pricing and revenue side, launched a new marketing campaign, closed unprofitable branches, invested in technology and invested $200 million in the fleet over the past two years.” Studdert added that the company will invest an additional $100 million in fleet in 2006.

NES emerged from Chapter 11 bankruptcy protection in February 2004 and hired Studdert as CEO in June of that year.

“We came through the bankruptcy process about two years ago and the subdebt holders ended up becoming the largest group of shareholders,” NES' chief financial officer Mike Milliken told RER. “Now they've been equity holders for about two years and are getting into their timeframe where they are interested in a liquidity event, and from a company standpoint, we want a long-term partner where, as opportunities arise, we would look to them. So we are looking at this as a natural evolution and it has happened on a good time schedule and we think the timing is good.”

“People who were part of our bondholders during the bankruptcy were converted into stockholders,” added Studdert. “They're what we'd call transitional shareholders. We need to move to a more permanent financial structure.”

Studdert said it was too early to speculate on who potential investors might be. “We don't have any visibility into who might be interested,” Studdert said. “We are looking at both financial buyers and strategic buyers and we'll see when we put our book out in the near future who's going to be interested.”

Studdert said same-store sales were increased about 10 percent year over year in 2005, and rental rates rose between 9 and 15 percent according to category. EBITDA increased from $118.7 million in 2004 to an estimated $151 million in 2005, Studdert added.

NES Rental is No. 5 on the RER 100.