Cerberus Capital Management is set to complete the largest-ever private equity deal in the popular equipment rental sector, with a $6.6 billion (€4.8 billion) agreement to purchase United Rentals.
The transaction for the world’s largest equipment rental company includes the assumption of approximately $2.6 billion in debt. Bank of America, Credit Suisse, Morgan Stanley and Lehman Brothers have agreed to provide necessary debt financing.
Under terms of the agreement, United Rentals stockholders will receive $34.50 per share in cash – a 25 percent premium over the company’s closing share price on 10 April, the day before it announced it was exploring strategic alternatives.
United Rentals – which employs more than 12,000 workers at 690 North American locations – has 30 days to solicit alternative bids.
The agreement with Cerberus is subject to customary closing conditions, regulatory and shareholder approval. Preferred stockholders, which represent roughly 18 percent of the voting power of the capital stock and include affiliates of Apollo Management, have agreed to vote in favour of the deal, according to a statement.
UBS was financial advisor to United Rentals, while Simpson Thacher & Bartlett was its legal advisor. Lowenstein Sandler as well as Schulte, Roth & Zabel’s Alan Waldenberg and Mary Marks, were legal advisors to Cerberus.
Private equity firms have paid out billions in recent years for equipment rental companies. Norwest Equity Partners and Lightyear Capital recently took part in a $900 million transaction for equipment rental company Neff. Last year, DLJ spin-out Diamond Castle Holdings purchased NES Rentals for $850 million and Ripplewood Holdings and Oak Hill Capital Partners took part in a $3.8 billion deal for RSC Holdings.