CHICAGO — NES Rental Holdings last month announced that it signed a definitive agreement to be acquired by affiliates of Diamond Castle Holdings LLC, a New York-based private equity firm. The transaction is valued at about $850 million, including the assumption of certain liabilities.
Diamond Castle will acquire all of the outstanding common stock of NES Rentals for $18.75 per share in cash. The purchase price per share represents a 42-percent premium to the company's closing price per share of $13.25 on Jan. 12, 2006, the day the company announced it would explore strategic alternatives.
NES Rentals chairman and CEO Andrew Studdert said the implementation of a series of operating and revenue initiatives during the past two years has improved return on investment. “After undergoing significant change in recent years, NES Rentals has emerged as a well-positioned and profitable business,” Studdert said. “The progress we have made allowed us to be in a position to consider options to unlock the value of our company.”
Earlier last month, NES released first-quarter results showing solid revenue growth and improvement in operating income. Total revenues improved 17 percent from last year's first quarter, to $140 million, and rental revenues were $110 million for the quarter, a 12-percent year-over-year increase. Same-store rental revenues increased 17 percent, and revenues from equipment sales, parts, supplies, and services improved 27 percent to $30 million.
NES Rentals reported operating income of $4 million for the first quarter of 2006, a $12 million improvement from an $8 million operating loss in last year's first quarter.
“Revenues are up and customer satisfaction surveys are extremely positive,” said Studdert. “These factors and a strong construction season combine to position us favorably for continued growth.”
Diamond Castle expects to retain NES Rentals' company name, management team and product lines. Studdert has agreed to continue on in his capacity as CEO and chairman following the transaction.
In December 2005, NES' board of directors retained Bear, Stearns & Co. to assist in reviewing strategic alternatives. “As part of this effort, the board undertook a wide-ranging auction process, ultimately resulting in the decision that the offer from Diamond Castle is in the best interests of the company and its shareholders,” said Studdert.
Completion of the sale is expected within 60 days, contingent upon customary closing conditions, including regulatory approvals, delivery of the committed financing, and the approval of NES Rentals' stockholders.
In regional news, NES Rentals will begin offering heavy equipment rental at its Tucson, Ariz., branch, previously devoted to traffic safety equipment and services. The company said area growth and customer need fueled the addition of construction equipment.
The fleet will consist of aerial work platforms, material lifts, compaction equipment, earthmoving equipment, light towers, generators, welders, breakers, trenchers and utility site vehicles from manufacturers such as Genie, Terex, Ditch Witch, Yanmar, Sullair and Skyjack.
Based in Chicago, NES Rentals is No. 7 on the RER 100.
