Sunstate Equipment Co., No. 12 on the RER 100 and one of the largest independent rental companies in North America, announced last week that Sumitomo Corp. will become a minority partner effective immediately. Sunstate, headquartered in Phoenix, currently operates 52 branch locations in eight states in the southwestern United States.
The partnership provides Sunstate with additional liquidity during the protracted downturn and positions the company to take advantage of growth opportunities as the economy begins to rebound. Michael Watts will remain the majority owner of Sunstate and continue to lead the company with the current management team and structure.
Sumitomo is the first Japanese company to make a full-scale investment in the U.S. equipment rental industry. Sumitomo has existing equipment rental businesses in Japan, Europe and Canada, where it owns Mississauga, Ontario-based SMS Rents, a major player in rental in Ontario and Quebec. Sumitomo said it invested $50 million in convertible preferred interests of Sunstate.
Sumitomo said it has been actively searching for an investment opportunity in the United States, because it has the largest rental market valued at more than $30 billion, and rental penetration rates that continue to increase annually. Sumitomo currently operates construction equipment dealerships in North America with annual volume of about 150 billion JPY (about U.S. $1.65 billion).
The partnership is the culmination of an 18-month relationship and discussions between the two partners. Through this relationship, leaders of both companies became confident that each shares the same values of quality, integrity, and concern for employees. In addition, a shared belief in the long-term prospects for the U.S. equipment rental industry provided incentive for this partnership as Sunstate is now poised to take advantage of the opportunities that the industry will offer in the future.
“Sumitomo approached us about investing in the equipment rental business in the United States and after studying the industry they concluded they wanted that investment to be in Sunstate,” Watts told RER. “We continued to talk for 18 months, they continued to have keen and strong interest and we determined that our cultures are very similar. We are very excited about it.”
Oppenheimer & Co. acted as exclusive financial advisor to Sunstate on the transaction.