NEW YORK — An affiliate of Odyssey Investment Partners last month reached a definitive agreement to acquire Neff Corp., North America's ninth-largest ranked rental company according to the new RER 100. The transaction was valued at $510 million, including the refinancing of Neff's debt. Current Neff management will retain a significant stake in the company.
Neff operates 66 branches primarily located in the Southeast and western United States. Neff serves more than 20,000 customers, primarily mid-sized, regional and local construction firms, municipalities, utilities and industrial users. CEO Juan Carlos Mas recently told RER the company grossed $193 million in rental volume in 2004 and $248 million in total volume.
Under terms of the agreement, unanimously approved by Neff's board of directors, Odyssey will acquire Neff's equity for $240.5 million, less expenses incurred in connection with the transaction. It is expected that Neff stockholders will receive between $8.19 and $8.27 per share in cash. The actual price will depend on the costs of the transaction. In addition to Odyssey's equity investment, Odyssey expects to fund the transaction with the net proceeds of newly issued debt securities and other borrowings. Odyssey recently closed a $750 million private equity fund formed to pursue control investments and management buyouts of middle-market companies.
Neff will continue to be headquartered in Miami and will operate as a private company under the ongoing leadership of president and CEO Juan Carlos Mas and other members of Neff management. The management team has been widely praised in the rental industry for turning around a company that was widely viewed a few years ago as a below-average performer that was close to a possible buyout or bankruptcy. Neff management successfully reorganized the company's fleet, divesting under-utilized equipment categories, closed under-performing branches, raised rental rates, and made concerted efforts to deepen its understanding of its customer base. Neff's profitability has improved significantly since instituting these changes.
“The transaction with Odyssey delivers immediate value to our stockholders and positions Neff for continued success in its markets,” Mas said. “We believe that Odyssey's experience with equipment management businesses and its capital markets expertise will be valuable to us as we execute our growth strategy.”
“The acquisition of Neff is an attractive opportunity to build on our experience in the equipment management sector,” added Odyssey chairman Stephen Berger. “Neff is well positioned to capitalize on the cyclical rebound of the non-residential construction market and the trend of contractors renting rather than owning construction equipment. In particular, we are impressed by the company's equipment focus, customer service and strong marketing and sales effort. We expect that Neff's favorable disbursement of productive locations throughout the Sun Belt, which features several positive demographic trends and strong construction activity, will drive continued top-line growth. We look forward to partnering with Neff's outstanding management team, under the leadership of Juan Carlos Mas.”
Neff is Odyssey's fourth platform in the equipment management sector. The firm's folio includes Williams Scotsman, mobile office and storage unit rental and leasing specialist; United Site Services, a provider of portable restroom services; and Dayton Superior Corp., a renter of concrete forming and shoring equipment.
Reaction in the rental industry was positive. “It's wonderful for the management of Neff, for J.C. Mas and [chief operating officer] Graham Hood, who are terrific people,” industry consultant Dan Kaplan of Daniel Kaplan Associates told RER. “To see a company like that get such a premium — more than twice revenue, or six times EBITDA — speaks very well for the whole rental industry. If Neff can bring that type of premium, it brings up the value of the entire industry and every rental company out there. It's the first validation of pricing of what a rental company is worth in many, many years, and for Neff it's a signal of continued growth and future acquisitions. I expect Neff in the next few years to be a national equipment rental company and even have a worldwide influence. It's a very positive indication of the value of the rental industry; now rental is really taking a substantial place in investors eyes and in the marketplace of the world.”
“I think [Odyssey] will be good for the rental industry,” added industry consultant and mergers & acquisitions specialist Gary Stansberry of Hageman, Stansberry & Associates. “Fresh investment into the industry, from a company that has history and knowledge of related industries, will bring a lot of benefit.”
The transaction is expected to be finalized during the second quarter, subject to approval by Neff stockholders and customary regulatory agencies.
Based in Miami, Neff Corp. is No. 9 on the RER 100.
