The world’s largest equipment rental company, United Rentals, showed its financial muscle on Wednesday 16th August 2017, by announcing to buy Neff Corporation for $1.3 billion in cash, or $25 per share.
This takeover trumps the previous offer by H&E Equipment Services Inc, who had made an offer to buy Neff Corporation for $21.07 per share in a previously announced merger statement.
United Rentals has been on a hot acquisitions spree this year as it had previously bought NES Rental Holdings in April this year for $965 million. The acquisition with Neff will allow United Rentals, already the world’s largest equipment rental company, to grow and build its brand presence more in areas where it had been encountering stiff market share competition.
In addition to this, this acquisition will also allow United Rentals to push its Project XL growth plans more aggressively.
The CEO of United Rentals, Michael Kneeland, described Project XL “A series of internal initiatives intended to drive profit generation through a combination of revenue and cost initiatives. Over the next two years, we expect Project XL to contribute at least a $200 million run-rate benefit to EBITDA. An important point to Project XL is that we do not view any of these opportunities as being dependent on the cycle; rather, they should be additive to our base business while helping us deliver more value to our customers” in an interview with Rental Equipment Magazine back in April, immediately after acquiring NES.
In the interview, Michael further elaborated on the company’s”Grow the Core” plans.
Neff Corporation’s earthmoving business was one of the key factors that made United Rentals put up this great offer because it perfectly aligns with its “Grow the Core” Policy. United Rentals definitely has a great fleet of earthmoving equipment of its own, but the addition of Neff’s equipment will allow United to realize greater efficiencies & further gain more direct access to key markets in the Southern States, where Neff was performing strongly for the past few years.
A total revenue of $419 million is expected from Neff Corporation in 2017, with around $219 million expected in EBITDA.
United has aimed to close the transaction fully by the end of the fourth quarter of this year.
H&E Equipment Services Inc, despite losing out on the acquisition, gained around $13.2 million as a termination fee after the cancellation of the previously announced merger with Neff. United will pay the termination fee to H&E Equipment Services Inc.
Neff immediately saw its stocks gain an impressive 3.6, closing on $116, immediately after the announcement was filed with the press. Neff’s stock price stood at $24.80, after seeing a surprisingly disappointing 1% rise, but is expected to rise further in the upcoming few months as the merger comes to a conclusion.