United Rentals (NYSE: URI) to boost industrial sales with RSC buy

Orlando, FL 12/16/11 (StreetBeat) -- World's largest equipment rental company United Rentals Inc (NYSE: URI) will buy rival RSC Holdings (NYSE: RRR) for about $1.9 billion to beef up its industrial business, as it looks to counter a weak commercial construction market.

With the deal, the company now expects to reduce its revenue share from the commercial construction market, which is yet to see a recovery as rising unemployment and inadequate finance for non-residential projects have dragged down business spending.

After the deal, industrial equipment rentals will form 35 percent of United Rental's revenue, up from the current 16 percent. Commercial construction revenue will fall to about half of its total sales from the present 60 percent level.

RSC, which rents out equipment like forklifts, pumps and power distribution systems, is United Rental's second acquisition in the industrial equipment segment this month, following its purchase of Blue Mountain Equipment Rental Corp.

Entrepreneur and investor Bradley Jacobs founded United Rentals in 1997 and, some 250 acquisitions later, turned it into the world's largest equipment rental company.

Private equity firm Cerberus Capital Management offered $6.6 billion for the company in 2007, but later withdrew the bid.

DEAL DETAILS
United Rentals said it will pay $10.80 in cash and 0.2783 of its share for each RSC share. The $18 per share offer is a 58 percent premium to Scottsdale, Arizona-based RSC's Thursday close of $11.37 on the New York Stock Exchange. The cash portion will be financed through new debt and current loan facilities, the company said.

The deal will add to United Rentals' earnings in the first full year after closing, and is expected to save over $200 million annually. Three of RSC's independent directors will get seats on United Rentals' board after the deal is closed.

Centerview Partners and Morgan Stanley advised United Rentals on the deal, while Barclays Capital and Goldman Sachs were lead financial advisors to RSC.

Shares of RSC were up 55 percent at $17.65 Friday morning on the New York Stock Exchange, after touching a life high of $17.75 earlier in the session. United Rental shares were up 4 percent at $26.99.

The stock of Smaller rival H&E Equipment Services was also up 14 percent at $13.70 on Nasdaq.

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