RSC, NationsRent Terminate Merger Agreement SCOTTSDALE, Ariz. - With a judge on the verge of ruling on legal challenges to their pending alliance, Rental Service Corp. and NationsRent unexpectedly terminated their merger agreement last month.
RSC will pay NationsRent $6 million as part of a settlement, which clears the way for United Rentals and other companies to pursue a deal for RSC. The original agreement called for a $40 million breakup fee, which United had sued to invalidate.
For RSC shareholders, faced with an either-or choice between United and NationsRent, the end of the merger pact may now bring higher bids. "A lot of people might criticize RSC for paying NationsRent any money [to kill the merger agreement], but by being proactive RSC has opened its alternatives significantly," said one analyst.
RSC is still asking shareholders to reject United's unsolicited cash tender offer of $22.75 per share while Merrill Lynch and Morgan Stanley review its strategic options. But United is still seeking to have a say in RSC's newfound freedom.
"With the barriers they erected gone, I expect that the possibilities of RSC's management talking to us are much greater," said Bob Miner, vice president of strategic planning. "They apparently are willing to talk to anybody and we assume that would include us."
Meanwhile, NationsRent will move forward with its acquisition backlog, which includes definitive agreements to acquire seven companies with $125 million in revenue, according to NationsRent chairman and CEO James Kirk.
"As time progressed, it became unlikely that we would be able to complete the merger on terms beneficial to NationsRent and its shareholders," Kirk said. "The merger agreement restricted our ability to continue the growth of our business through acquisitions and internal expansion."
But Wall Street analysts saw the merger collapse as a negative for NationsRent. "They lost out on a big strategic opportunity, and with all the mudslinging that went on in court, they now have a lot of explaining to do to their institutional investors," said one analyst.
New Holland to Buy Case for $4.3 Billion RACINE, Wis.- New Holland has agreed to acquire Case Corp. for $4.3 billion in cash in a deal that will create the world's third largest construction equipment manufacturer, behind No. 1 Caterpillar and Komatsu, and a rival to No. 1 Deere & Co. on the agricultural side.
By combining, the two companies will approach sales of about $12 billion and realize cost savings of up to $500 million within three to four years through job cuts and other unspecified measures, according to company officials.
Case's strong dealer network is expected to boost New Holland's expansion efforts into the North American construction equipment market, while New Holland will help better establish Case products in Europe.
Italy's Fiat SpA, which owns 69 percent of New Holland, will sell debt and equity to fund the $55-per-share purchase, which is subject to U.S. and European regulatory approval. Fiat will own 71 percent of the New Holland-Case entity.
New Holland headquarters in The Netherlands will move to Case's home here, where Case chairman/CEO Jean-Pierre Rosso will hold the same posts in the combined company. New Holland chief executive Umberto Quadrino will be co-chairman for a transition period.
Rosso told analysts that New Holland-Case might pursue acquisitions in the construction equipment segment once the deal is completed, expected in the third quarter of 1999.
Investment Bank to Buy 25% of NES EVANSTON. Ill. - Investment bank Brown Brothers Harriman & Co. last month agreed to pay $100 million to acquire slightly less than 25 percent of National Equipment Services, No. 7 on this year's RER 100.
Under the terms of the private equity placement, NES will sell $100 million of convertible preferred stock to a group of investors led by Brown Brothers Harriman's 1818 Fund, which takes non-controlling equity positions in companies for institutional investors and high net-worth individuals. The preferred stock is convertible into NES common stock at $13 per share.
"Obviously, this gives us access to additional capital and de-leverages our balance sheet, but it also gives a clear signal that NES is not for sale," NES CEO Kevin Rodgers told RER. "In order to do this, [majority NES shareholder] Golder, Thoma, Cressey, Rauner had to get comfortable with the idea that it is going to resist the calls from all the usual suspects about selling NES to the highest bidder. We are going to be in this for the long haul, and we are going to build a $2 billion to $3 billion rental company."
Rodgers added that NES, based here, would use the capital infusion to fund a massive expansion campaign that includes the acquisition of five companies currently under letter of intent.
The first $60 million of Brown Brothers investment was made last month. The remaining $40 million, which is subject to shareholder approval because of SEC regulations, will be voted on at the company's annual meeting later this month.
Because Golder, Thoma, Cressey, Rauner Fund V holds 57.5 percent of NES' outstanding common stock, approval of the deal is considered a formality, according to NES. Once Brown Brothers' investment is finalized, Golder, Thoma, Cressey, Rauner will hold about a 44 percent stake in NES.
Upon completion of the deal, Brown Brothers Harriman partner Lawrence Tucker will join NES' board of directors. John Molner, managing director of mergers and acquisitions at New York-based Brown Brothers, said the investment bank's stake in NES would not impact its M&A work with other companies.
"A conflict would exist if we did not make our interest in NES clear," Molner said. "But we will make it clear, and we will continue to find our clients the best buyer for their businesses whether it is United, NES or whoever."
NES Buys S&R's Chicagoland Branches CHICAGO - National Equipment Services acquired the two Chicago-area branches of S&R Equipment from American Equipment Co. last month.
S&R, primarily an aerial specialist, has operated as a division of Greenville, S.C.-based American Equipment Co. for several years and has six other branches in the upper Midwest.
S&R's two Chicagoland branches, located in the suburbs of Riverdale and Streamwood, gross about $9 million a year in revenue, 70 percent in rental. Rodgers told RER that the branches will be operated under the Falconite Equipment division of NES and will use the Falconite name.
With the acquisition of the branches, Evanston, Ill.-based NES, No. 7 on the RER 100, now has 123 branches in 29 states.
CRA To Expand to 'Western States' WOODLAND, Calif. - The California Rental Association announced two major changes to its bylaws last month: a new name - Rental Industry Association - and expansion from California and Nevada to inclusion of the western states. The changes were effective May 1.
CRA president Tony Beringer, Baker Party Rentals, Costa Mesa, Calif., said the changes were necessary because the association "had to respond to the revolution that had begun to hit the rental industry." The changes come after an 18-month study undertaken by CRA's board of directors and long-range planning committee.
Beringer and executive director Chuck Maltese said that increased size and a larger marketing area would allow RIA to offer a wider array of services to its members. Maltese said the association would begin exploring the possibility of providing such services as a one-way trailer system, customer charge cards, marketing and advertising programs, and the creation of a credit union. He said the association has explored those and other programs in the past but found it difficult to interest providers because of the organization's relatively limited geographic territory.
Maltese said the expansion of CRA's territory is in no way related to past disagreements with the American Rental Association, nor is it an attempt to compete with ARA or develop a national organization. "RIA will not address national issues which should be covered by the American Rental Association," added Beringer. "RIA will, in fact, encourage all rental centers to join both ARA and RIA, and hopes that the two organizations will be in the position of conducting joint programming in the near future."
ARA president Richard Paquette told RER that he did not see CRA's move as a threat to its national constituency. "It's their option; we are not disturbed or concerned," said Paquette. "We are focusing on the 41 state associations that have joined our program. ARA will continue to cooperate with [RIA] as an independent association serving California on federal and regulatory issues."
Maltese said that in the past state and local rental associations from other states have shown interest in joining CRA to take advantage of its services, but CRA held them at arms length because of its by-laws. He said now RIA will solicit their involvement.
An additional change includes the broadening of eligibility requirements for board membership to include officers of rental companies, rather than strictly owners, as well as members of LLCs and partners of voting members. Also RIA will replace the current chapter structure with territories, which could be a state, a portion of a state, or several states banded together. CRA has yet to define which "western states" will be eligible for RIA membership.
United Acquires AWP Specialist NEWPORT NEWS, Va - United Rentals last month acquired aerial work platform specialist Valjar Inc., which has locations in Newport News and Chesapeake, Va.
Terms of the deal were not disclosed, but Valjar had estimated 1998 total revenue of about $11 million, about half of which was rentals, according to sources.
Former Valjar owner Vincent Reca, who was advised by Brown Brothers Harriman, New York, during negotiations, will stay with United as a consultant, while Reca's sons, Paul and Kevin, will handle day-to-day operations.
Valjar, a JLG dealer, rents most of its 200-unit rental fleet to shipbuilding customers in and around Norfolk, Va.
Other recent acquisitions by Greenwich, Conn.-based United include:
* Purves Ritchie Equipment, five locations, Burnaby, B.C., Canada;
* ABZ Equipment, two locations, Glendale, Ariz.;
* West Georgia Rents, two locations, Carrolltown, Georgia;
* Alban Equipment, one location, Columbus, Ohio;
* Connecticut Drill Rod & Supply, one location, Newington, Conn.
* Koral Equipment, one location, Somerville, Mass.;
* Minneapolis Equipment, one location, Minneapolis;
* Southern Equipment, one location, Baton Rouge, Louisiana.
JLG to Acquire Gradall McCONNELLSBURG, Pa. - JLG signed a definitive agreement last month to buy Gradall Industries for $200 million in cash. The aerial work platform manufacturer will pay $20 a share for Gradall, a 14 percent premium to its closing price May 10.
The deal gives JLG access to the material handler and excavator markets, creating a diversified capital equipment group with combined revenues of $800 million.
"The increased size and expanded product breadth will further enhance our ability to compete in a consolidating rental industry marketplace and position JLG for future growth opportunities, both domestically and internationally," said JLG CEO, chairman and president David Black.
The acquisition places JLG closer to its goal of becoming a $1 billion company, he said.
Also included in the deal are Gradall's 430,000-square-foot New Philadelphia, Ohio, headquarters and a 300,000-square-foot facility in Orrville, Ohio.
The transaction is expected to be complete by July 31.
HERC Creates Pump Specialty Division PARK RIDGE, N.Y. - Hertz Equip-ment Rental Corp. has formed a specialty division to serve pump niche customers, according to the company.
The Hertz Equipment Rental Pump Solutions Division will provide a full line of pumps, including vacuum priming pumps and submersible pumps ranging from 3 to 20 inches primarily in the southeastern United States.
The company, No. 2 on this year's RER 100, created the division in response to customer demand, according to HERC president Gerry Plescia.
"We offer the most up-to-date pump product line and a team of specialists to assist customers with all their pump needs - from the evaluation and recommendation of equipment to the installation and instruction of pump usage," Plescia said.
The Hertz Pump Solutions will include experts in pump sales, applications and installation across the country.
In other HERC news, the company has added nine new locations. It acquired three-location Panama City Beach, Fla.-based A-1 Rent-All Center, and Outfitter, New Braunfels, Texas. It also opened start-ups in Sugar Hill, Ga.; Deer Park, Texas; Clarksville, Tenn.; and South Portland and Hillsboro, Ore.
HERC now has more than 230 locations.
Of the top officers at the largest 10 companies on this year's RER 100, just two CEOs have been in the current post for more than five years.
