Ford Increases Offer for Remaining Hertz Shares
DEARBORN, Mich. — Ford Motor Co. announced it will pay about $710 million to acquire the publicly held portion of Hertz, including its equipment rental division. Ford, which already owns 81.5 percent of Hertz, will purchase the remaining shares for $35.50 each, up from an offer of $30 per share it made in September.
The acquisition is an about-face for Ford, which took Hertz public in 1997 while retaining 81.5 percent. The companies expect to close the transaction early in the second quarter.
After the announcement, Standard & Poor's reaffirmed Hertz's long-term credit ratings on CreditWatch with positive implications. Hertz's current ratings incorporate Ford's 81.5 percent ownership stake and Hertz's strategic importance as Ford's largest customer. However, if Ford extends financing support to Hertz for its capital needs, Hertz's ratings likely would be upgraded to Ford's level, according to S&P's. If Hertz continues to self-fund, its ratings likely would be affirmed.
ARA, RIA Boards Approve Unity Efforts
MOLINE, Ill. — The boards of directors of the American Rental Association and the Rental Industry Association jointly announced their approval of efforts by the organizations to work toward a cooperative agreement. Officers and executive staff have held numerous meetings since November to discuss options regarding an alliance that would combine the strengths of the organizations.
Although neither organization offered details of the recent talks, participants in the high-level discussions were optimistic about the tone of the discussions and future possibilities.
“It's a very positive effort, but it will take time,” ARA president Frank Wilson told RER. “You have 40 years of history on both sides, so you can't expect big changes to happen overnight. But both organizations are committed, our boards are committed, our executive vice presidents are involved, and we're all working very well together.”
Although Wilson said no particular projects have been finalized, the two associations have discussed a wide range of topics and potential areas of cooperation.
The organizations were to meet again early this month, shortly after the ARA convention.
United Rentals Extends Neff Deadline Again
GREENWICH, Conn. — United Rentals extended for a third time the expiration date of its offer to buy the majority of Neff's common stock. United pushed the expiration date from Feb. 16 to Feb. 26.
United's bid, valued at about $314 million based on its share price at the time of the offer, is supported by GE Capital, which has agreed to put $90 million of equity into United at $22 a share.
Aggreko Opens Branch in Tampa
TAMPA, Fla. — Aggreko opened a service center in Tampa, its fourth in Florida and 62nd in the United States. The branch joins Aggreko service centers in Jacksonville, Miami and Orlando. Previously, the Orlando center served the Tampa Bay area.
The new location will target high-tech and telecommunications companies, port and shipping concerns, and contractors. One of the location's first jobs was to supply backup power and tent heating and cooling to Super Bowl XXXV, southeast regional manager Tim Ainslie said.
Bob Romano moved from the Miami branch to manage the facility, which opened with eight employees and an inventory including power generators, dehumidifiers, oil-free air compressors, water chillers and cooling towers.
Aggreko, with U.S. headquarters in New Iberia, La., has more than 120 locations worldwide.
Executives Bullish on Interest Rate Cuts
MALIBU, Calif. — Many rental industry participants said they were pleased by the Federal Reserve's second interest rate cut in January. While they didn't expect the news to lead to an immediate spending spree on new equipment or a massive surge of new projects, they did expect greater optimism and a sense that the Fed will not stand by and allow the country to drift uncontrollably into recession. RER talked with rental company executives, manufacturers and financial analysts. Here are a few of their comments:
Bob Fien, CEO, Stone Construction Equipment, Honeoye, N.Y.: “The Fed's recent rate cut will certainly be helpful, but not for the traditional reasons. I think we are just in a slowdown. If we are on the brink of a recession, it's the strangest one I've ever seen. Usually, the construction sector leads the country into a recession, but frankly I don't think the industry is all that bad at the moment. Most of the contractors I've talked to in the last four weeks are busy. Appropriations for TEA-21 look good for 2001. Housing starts are strong, although permits are down, which could be a problem in a couple of months. Mortgage rates [were] low even before the rate cut. And on the broader economy, all the fundamentals, with the exception of oil, are pretty good. Capital expenditures are down a little, but not dramatically. Even with all the layoffs, the unemployment rate — at least for now — is still good.
I think we have a crisis of confidence, which could lead us into a recession if it goes on much longer. So the rate cuts are helpful, not because they will encourage massive new capital expenditures, but because of the psychological impact on people. Hopefully, people will feel more positive. A tax cut will further boost that optimism.”
Mark Irion, chief financial officer, Neff, Miami: “It's a big cut, but [how much it affects you] depends on the floating-rate bank debt you're sitting on. For an average, we have about $140 million in bank debt on a revolving line each year, so it's a shot in the arm. United has about $900 million, so the rate cut will help them more. But it doesn't change things overnight.”
Larry Pedersen, owner, A Tool Shed, Campbell, Calif.: “Interest rate cuts will help considerably in the area of home buying. The buying and selling of houses helps our business. More people fix up their homes for resale, and more people think they can afford to get loans to buy a house, fix it up and spend money on improvements. It keeps landscape contractors, plumbers and electricians busy, and all that is good for us.”
Blair Brumley, vice president, equity research, Credit Suisse First Boston, Chicago: “Not only the trend, but its magnitude and the vigor with which the Fed is now moving to reduce rates can't but help the economy over time.”
Brad Jacobs, CEO, United Rentals, Greenwich, Conn. (reacting to the Fed's first interest rate cut in early January): “We have about $2 billion of floating-rate debt. So [Fed chairman] Alan Greenspan gave us about $9.5 million this week — that's about how much our interest expense will fall over the course of the year on a half-percentage point cut of the interest rate. But what it affects in terms of customer psychology to do construction projects and expansion should really help the industry, too. It increases the demand for how many people are prepared to buy and rent equipment.
“It's going to be a funny year. We're going to see the delayed negative reaction from interest rates being raised last year, a little sluggish demand. My best guess is the second half of the year things could get better.”
AED Show Draws 3,100
LAS VEGAS — Near-record attendance sparked a vibrant atmosphere at the Associated Equipment Distributors convention and Condex trade show in Las Vegas in January.
According to Tom Astrene, AED's director of publications, about 2,900 attendees were preregistered and on-site registration brought total attendance to more than 3,100. Those numbers were comparable to those for the 2000 show in Chicago, one of the association's most successful, Astrene said. Condex had 212 exhibitors and 563 booths, both records for the association.
Most exhibitors were pleased with show-floor traffic, and seminars were well-attended. As usual, much of the action took place behind closed doors in hospitality suites where manufacturers and distributors socialized and talked business.
Most show participants seemed cautiously optimistic regarding the economy and how it will affect the equipment distribution industry. While many feared a significant slowdown or even a recession a few months ago, most distributors and manufacturers now expect a more mild slowdown, and most distributors talked to by RER said they still expect solid business activity this year.
The AED presidency was passed from Chris MacAllister of MacAllister Machinery, Indianapolis, to John Zoubek, president of Zoubek Associates, a division of A.H. Harris & Sons, Parlin, N.J.
Seminars covered a wide range of topics, including a rental industry study presented by Frank Manfredi of Manfredi & Associates in Mundelein, Ill., expectations of equipment fleet managers, demographics and work-force issues, compensation trends, maximizing profits through e-commerce, and an analysis of the global economy and its impact on business and society.
Economy's Full-Year Growth Continues
WASHINGTON — Despite a final three months of 2000 that marked the slowest growth rate in more than five years, the U.S. economy grew 5 percent for the year. The rise was the largest since a 7.3 percent increase in 1984.
The Commerce Department reported the country's gross domestic product rose 1.4 percent during the fourth quarter, below the expected 2.2 percent increase.
Also in the fourth quarter, inflation on consumer goods rose at an annual rate of 2.2 percent compared with 1.8 percent in the third quarter. For the year, that rate was up 2.4 percent, the highest since 1993. Consumer spending in the fourth quarter jumped at an annual rate of 2.9 percent compared with 4.5 percent in the third quarter.
Fourth-quarter housing construction dipped 2.5 percent, and business investment in new plants and equipment fell 1.5 percent. In December, construction spending overall rose 0.6 percent to an annual rate of $811.5 billion. For the year, it jumped 5.7 percent to $807.8 billion.
The Commerce Department also reported a 13.4 percent rise in December new home sales, the biggest monthly gain in more than seven years. For the year, sales slid 1 percent from 1999 but were still the second-highest on record.
AEL Opens Indianapolis Office
INDIANAPOLIS — American Equipment Leasing, based in Reading, Pa., opened an office in Indianapolis under the management of Robert Keller.
The company said the location was established to focus on startups in the construction equipment industry nationwide. Keller had been with National City Leasing.
