United Rentals announced today that it has signed a definitive merger agreement to be acquired by affiliates of Cerberus Capital Management for about $4 billion in cash and about $2.6 billion in assumed debt.
The $34.50-per-share purchase price is a 7 percent premium over United’s closing price of $32.37 Friday, and a 25 percent premium to the stock’s closing price of $27.55 April 10, the day the company announced it was exploring strategic options.
“We’re pleased that our strategic alternatives process has resulted in this favorable agreement for our shareholders,” said United Rentals chairman Brad Jacobs. “This transaction is a credit to the thousands of United Rentals employees who have created unmatched value in our industry. A decade ago we started United Rentals with little more than a concept and achieved industry leadership in just 13 months.”
United Rentals’ CEO Michael Kneeland said, “Cerberus is a firm that shares our deep respect for operational excellence.”
United Rentals’ board has already approved the transaction. Still, the company can continue to seek third-party offers through August 31. Holders of United’s preferred stock, including affiliates of Apollo Management LP, which represents about 18 percent of United’s voting power, have agreed to vote in favor of the Cerberus deal.
United Rentals, the equipment rental industry’s largest company, No. 1 on the RER 100, posted profits of $224 million on total revenue of $3.64 billion in 2006, with rental revenue of $2.53 billion.
The acquisition is the largest in rental industry history. Then No. 2 rental company Rental Service Corp., was sold late last year for about $3.8 billion, and NationsRent was acquired last year by Sunbelt Rentals for about $1.1 billion in cash and assumed debt.
UBS Investment Bank acted as financial advisor to United Rentals in connection with the strategic review process and the transaction. Bank of America Corp., Credit Suisse Group, Morgan Stanley and Lehman Brothers Holdings Inc. will provide financing for the transaction.
The acquisition is subject to customary closing conditions, regulatory review and approval by United Rentals shareholders.