GREENWICH, Conn. — United Rentals recently provided an “integration update” to its community of investors in regard to its recently finalized acquisition of RSC Rental, during which the company said that the combined companies' targeted cost synergies have been raised to $230 million. The company said it expects rental rates to improve 6 percent in 2012.
United told investors that two weeks after the transaction's close, a field leadership team was in place, employee playbooks have been distributed and are in use to ease the transition at the branch level, and cross-company visibility of fleet has been provided at the branch level, enabling easy sharing of equipment. The company has also launched an employee microsite and held senior leadership meetings with branches throughout North America.
To reach the goal of $230 million in cost synergies, United officials said branch consolidation would save 34 percent, corporate overhead 26 percent, regional field overhead 10 percent, and other efficiencies 31 percent. It expects to reach $70 million in cost savings (realized EBITDA impact) in 2012, $200 million by 2013 and $230 million by 2014.
United Rentals CEO Michael Kneeland outlined upcoming milestones and key activities including:
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Rental rate improvement through a rollout of CORE (Customer Oriented Rates Excellence) across the combined company; enhanced value proposition and service to customers; optimized rental agreements with largest customers.
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Realigning salesforce territories to ensure maximum effectiveness;
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Consolidation of IT platforms by mid-June;
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Beginning branch consolidations in late June;
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Implementation of ‘best-of-both’ business process — delivery, fleet process and repair and maintenance;
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Manage the capture of cost, revenue and capex synergies.
Recapping the first quarter, United Rentals posted $523 million in first-quarter rental revenue, while RSC posted $346 million, increases of 20.5 percent and 27.4 percent respectively, with United Rentals realizing total revenue of $656 million (up 25.4 percent) and RSC $408 million (up 24.8 percent.)
In the month of April, United Rentals posted rental revenue of $188 million (a 19.2-percent year-over-year hike), while RSC grossed $120 million (up 19.6 percent). In total revenue United Rentals had $231 million (up 23.2 percent) and RSC $139 million (up 19.5 percent).
While Kneeland cautioned that it was too early to project combined revenue growth, he said he is confident that it would increase. Referencing the IHI Global Insight forecast issued this month, residential construction is expected to increase 9.8 percent year over year in 2012, 16.6 percent in 2013 and 26.1 percent in 2014. While commercial construction is forecast to decline 2.9 percent in 2012, it will grow 16.8 percent in 2013 and 24.4 percent in 2014.
United Rentals' chief financial officer Bill Plummer said net capex for 2012, for the two companies on a pro-forma basis, will total somewhere between $1.075 billion and $1.125 billion. Chief operating officer Matt Flannery said, in response to an investor question, that morale seemed extremely high as United Rentals- and RSC-branded branches are beginning to work together.
United Rentals, No. 1 on the RER 100, is based in Greenwich, Conn.
