$1 billion transaction will establish United
Rentals as a leader in the mobile storage and modular office
sectors in key markets, expanding the equipment rental industry’s
most complete service offering
Expected to be accretive to EPS and free
cash flow upon close
United Rentals, Inc. (NYSE: URI) (“United Rentals” or “the
company”) and General Finance Corporation (NASDAQ: GFN) (“General
Finance”) today announced their entry into a definitive agreement
under which United Rentals will acquire General Finance for $19 per
share in cash, representing a total enterprise value of
approximately $996 million, including the assumption of $400
million of net debt. The transaction is expected to be accretive to
EPS and free cash flow upon close.
General Finance, which operates as Pac-Van and Container King in
the U.S. and Canada, and as Royal Wolf in Australia and New
Zealand, is a leading provider of mobile storage and modular office
space. Its network of 106 branches and over 900 employees serves
diverse end markets, including construction, commercial,
industrial, retail, transportation, petrochemical, consumer,
natural resources, governmental and education.
As of December 31, 2020, on a trailing 12-month basis, General
Finance generated $94 million of adjusted EBITDA on $346 million of
total revenue, translating to a 27.2% adjusted EBITDA margin. As of
March 31, 2021, General Finance’s rental fleet consisted of
approximately 100,000 units at an original cost of approximately
$639 million.
The boards of directors of United Rentals and General Finance
unanimously approved the transaction, which is subject to customary
closing conditions, including the expiration or early termination
of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and other regulatory approvals. United
Rentals intends to commence a tender offer by April 26, 2021, to
acquire all of the outstanding shares of GFN common stock for $19
per share in cash. Following completion of the tender offer, a
wholly-owned subsidiary of United Rentals will merge with and into
General Finance and shares of General Finance common stock that
have not been tendered and purchased in the tender offer will be
converted into the right to receive $19 per share in cash. The
transaction is expected to close in the second quarter of 2021. The
company plans to update its 2021 financial outlook to reflect the
combined operations following the completion of the
transaction.
Strong Strategic Rationale
- General Finance’s positioning as a leader in the North American
sector for mobile storage and office solutions strongly complements
United Rentals’ leading positions in general construction and
industrial rentals and specialty rentals. This will further
differentiate the company through its ability to deliver value as a
one-stop-shop for customers.
- General Finance operates in 52 of the top 100 MSAs in North
America served by United Rentals locations, which will create
immediate cross-sell opportunities. Importantly, United Rentals
will have the ability to introduce mobile storage and modular
office solutions in its MSAs currently not served by General
Finance.
- General Finance’s mobile storage and office business in
Australia and New Zealand will give United Rentals entry into these
geographies with an established platform run by a seasoned
management team, and with a strong growth strategy already in
place.
- General Finance shares many cultural similarities with United
Rentals, including a customer-first business philosophy, long-term
customer relationships across diverse end markets and a strong
focus on safety.
- Approximately 900 General Finance employees will bring a wealth
of experience to United Rentals in the combination. They will
benefit from industry-leading technology, state-of-the-art training
and safety programs and other resources, and have greater
opportunities for career development within the larger
company.
Robust Financial Drivers
- United Rentals sees significant potential upside to
profitability from the transaction over the next several years,
driven by synergies within the combined operations, complementary
services, efficiencies of scale and an aggressive growth strategy.
The company is targeting $65 million of total revenue synergies in
the first three years post-close.
- The company expects to realize a $17 million benefit to
adjusted EBITDA by the end of year two from cost synergies achieved
through the integration, including operational efficiencies and a
reduction in corporate overhead. This is equivalent to 4.9% of
General Finance’s trailing 12-months total revenue, and 10.4% of
the combined cost of leasing operations and selling and general
expenses over the same period.
- The company expects to realize approximately $19 million in net
present value of tax benefits included in the $996 million purchase
price.
- Net of synergies, the purchase price represents a multiple of
9.0 times trailing 12-month adjusted EBITDA, and an adjusted
purchase multiple of 8.8 times, including the net present value of
acquired tax benefits.
- Return on invested capital is expected to exceed the cost of
capital within 18 months of closing on a run-rate basis, with an
attractive IRR and NPV.
- The company expects to maintain an as-reported leverage ratio
of less than 2.5 times net debt to EBITDA at closing, and a pro
forma leverage ratio of less than 2.4 times at closing.
- The transaction is not conditioned on financing. United Rentals
expects to use a combination of cash and existing capacity under
its ABL facility to fund the transaction and related expenses.
CEO Comments
Matthew Flannery, president and chief executive officer of
United Rentals, said, “Our acquisition of General Finance will be a
significant opportunity for us to further differentiate our value
in the eyes of our customers, while providing attractive, long-term
returns for our shareholders. We see strong growth potential from
this combination, including our ability cross-sell mobile storage
and office solutions to our customers. Our expansion into this
space comfortably checks all three boxes of our M&A criteria —
strategic rationale, financial impact and cultural fit.”
Flannery continued, “We’re confident the time is right to
reengage in M&A with this highly strategic combination, as our
end markets recover from the challenges of 2020. General Finance is
a customer-focused organization with excellent field operators and
specialized expertise that complements our own. We look forward to
welcoming our new employees and customers as an important part of
our future.”
Jody Miller, chief executive officer of General Finance,
commented, “Our combination with United Rentals — the industry
leader in equipment rentals — is a strong outcome for everyone
involved. Our customers will benefit from United’s extensive
solutions and geographic footprint, and our employees will have new
opportunities as part of the largest rental team in the world.”
Key Acquisition and Transaction Statistics Financial
information in $ millions
Purchase Price
$
996
Present Value of Acquired Tax Assets
$
19
Total Revenue (full-year calendar
2020)
$
346
Adjusted EBITDA (full-year calendar
2020)
$
94
Estimated Annualized Cost Synergies
Achieved by End of Year Two
$
17
Estimated Annualized Cross-selling
Benefits Achieved by End of Year Three
$
65
Original Equipment Cost of Fleet
$
639
Number of Rental Units
~100,000
Employees
~930
Rental Branches
106
Customers
~50,000
Sullivan & Cromwell LLP acted as United Rentals’ legal
advisor in the transaction, and Morrison and Foerster LLP acted as
General Finance’s legal advisor.
Conference Call
United Rentals will hold a conference call tomorrow, April 16,
2021, at 8:30 a.m. Eastern Time. The conference call number is
(855) 458-4217 (international: (574) 990-3618). The replay of the
call can be accessed at (404) 537-3406, passcode 7279967.
Non-GAAP Measures
General Finance’s adjusted EBITDA is a non-GAAP financial
measure as defined under the rules of the Securities and Exchange
Commission. United Rentals believes that this non-GAAP financial
measure provides useful information about the proposed transaction;
however, it should not be considered as an alternative to GAAP net
income. A reconciliation between General Finance’s adjusted EBITDA
and GAAP net income, as well as other financial data, is provided
in the investor presentation available on the company’s
website.
About United Rentals
United Rentals, Inc. is the largest equipment rental company in
the world. The company has an integrated network of 1,154 rental
locations in North America and 11 in Europe. In North America, the
company operates in 49 states and every Canadian province. The
company’s approximately 18,250 employees serve construction and
industrial customers, utilities, municipalities, homeowners and
others. The company offers approximately 4,000 classes of equipment
for rent with a total original cost of $13.78 billion. United
Rentals is a member of the Standard & Poor’s 500 Index, the
Barron’s 400 Index and the Russell 3000 Index® and is headquartered
in Stamford, Conn. Additional information about United Rentals is
available at unitedrentals.com.
About General Finance Corporation
Headquartered in Pasadena, California, General Finance
Corporation (NASDAQ: GFN) is a leading specialty rental services
company offering portable storage, modular space and liquid
containment solutions. General Finance’s North America operations
consist of wholly-owned subsidiaries Pac-Van, Inc., a leading
provider of portable storage and office containers, mobile offices
and modular buildings; and Lone Star Tank Rental Inc., a provider
of liquid storage tank containers. Additionally, General Finance
has wholly-owned subsidiaries Royal Wolf, a leading lessor of
portable storage solutions in Australia and New Zealand; and
Southern Frac, LLC, a manufacturer of portable liquid storage tank
containers in North America and, under the trade name Southern
Fabrication Specialties, other steel products.
Cautionary Statement Regarding Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and the Private Securities Litigation Reform Act of
1995, known as the PSLRA. Forward-looking statements involve
significant risks and uncertainties that may cause actual results
to differ materially from such forward-looking statements. These
statements are based on current plans, estimates and projections,
and, therefore, you should not place undue reliance on them. No
forward-looking statement, including any such statement concerning
the completion and anticipated benefits of the proposed
transaction, can be guaranteed, and actual results may differ
materially from those projected. Forward-looking statements are not
historical facts, but rather are based on current expectations,
estimates, assumptions and projections about the business and
future financial results of the equipment rental industries, and
other legal, regulatory and economic developments. United Rentals
and General Finance use words such as “anticipates,” “believes,”
“plans,” “expects,” “projects,” “future,” “intends,” “may,” “will,”
“should,” “could,” “estimates,” “predicts,” “potential,”
“continue,” “guidance” and similar expressions to identify these
forward-looking statements that are intended to be covered by the
safe harbor provisions of the PSLRA. Actual results could differ
materially from the results contemplated by these forward-looking
statements due to a number of factors, including, but not limited
to, those described in the SEC reports filed by United Rentals and
General Finance, as well as the possibility that (1) United Rentals
may be unable to obtain regulatory approvals required for the
proposed transaction or may be required to accept conditions that
could reduce the anticipated benefits of the acquisition as a
condition to obtaining regulatory approvals; (2) the length of time
necessary to consummate the proposed transaction may be longer than
anticipated; (3) problems may arise in successfully integrating the
businesses of United Rentals and General Finance, including,
without limitation, problems associated with the potential loss of
any key employees of General Finance; (4) the proposed transaction
may involve unexpected costs, including, without limitation, the
exposure to any unrecorded liabilities or unidentified issues that
United Rentals failed to discover during the due diligence
investigation of General Finance or that are not covered by
insurance, as well as potential unfavorable accounting treatment
and unexpected increases in taxes; (5) United Rentals’ business may
suffer as a result of uncertainty surrounding the proposed
transaction, any adverse effects on our ability to maintain
relationships with customers, employees and suppliers, or the
inherent risk associated with entering a geographic area or line of
business in which United Rentals has no or limited experience; and
(6) the industry may be subject to future risks that are described
in the “Risk Factors” section of the Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and other documents filed from time
to time with the SEC by United Rentals and General Finance. United
Rentals and General Finance give no assurance that they will
achieve their expectations and do not assume any responsibility for
the accuracy and completeness of the forward-looking
statements.
The foregoing list of factors is not exhaustive. You should
carefully consider the foregoing factors and the other risks and
uncertainties that affect the businesses of United Rentals and
General Finance described in the “Risk Factors” section of the
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
other documents filed from time to time with the SEC by United
Rentals and General Finance. This press release is not intended to
be a recommendation to buy, sell or hold securities and does not
constitute an offer for the sale of, or the solicitation of an
offer to buy securities in any jurisdiction, including the United
States. Any such offer will only be made by means of a prospectus
or offering memorandum, and in compliance with applicable
securities laws. These forward-looking statements speak only as of
the date hereof. United Rentals and General Finance undertake no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise, except as may be required by applicable securities
laws.
Additional Information and Where to Find It
This press release is for informational purposes only and is
neither an offer to purchase nor a solicitation of an offer to sell
securities. The tender offer described in this press release has
not commenced. At the time the tender offer is commenced, United
Rentals will file, or will cause to be filed, tender offer
materials on Schedule TO with the SEC and General Finance will file
a Solicitation/Recommendation Statement on Schedule 14D-9 with the
SEC, in each case with respect to the tender offer. The tender
offer materials (including an offer to purchase, a related letter
of transmittal and other offer documents) and the
solicitation/recommendation statement will contain important
information that should be read carefully when they become
available and considered before any decision is made with respect
to the tender offer. Those materials and all other documents filed
by, or caused to be filed by, United Rentals and General Finance
with the SEC will be available at no charge on the SEC’s website at
www.sec.gov. The tender offer materials and related materials also
may be obtained for free (when available) under the “Our
Company—Investor Relations—SEC Filings” section of United Rental’s
website at https://unitedrentals.gcs-web.com/sec-filings, and the
Solicitation/Recommendation Statement and such other documents also
may be obtained for free (when available) from General Finance
under the “Investor Information—SEC Information” section of General
Finance’s website at
https://generalfinance.com/sec-information/.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210415006134/en/
United Rentals, Inc. Ted Grace Office: (203) 618-7122
Cell: (203) 399-8951 Email: tgrace@ur.com
General Finance Corporation Larry Clark Financial
Profiles, Inc. Office: (310) 622-8223 Email:
lclark@finprofiles.com
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