United Rentals and H&E Equipment Services announced their entry into a definitive agreement under which United Rentals will acquire H&E for $92 per share in cash, reflecting a total enterprise value of about $4.8 billion, including roughly $1.4 billion of net debt.
Launched in 1961, H&E provides its customers with a comprehensive mix of high-quality general rental fleets, including aerial work platforms, earthmoving equipment, material handling equipment, and other general and specialty equipment lines. And with approximately 2,900 employees and $2.9 billion of rental fleet at original cost, the company serves a diverse mix of customers across construction and industrial markets through its network of approximately 160 branches in over 30 U.S. states.
On a trailing 12-month basis through September 30, 2024, H&E generated $696 million of adjusted EBITDA on total revenues of $1.518 billion, translating to an adjusted EBITDA margin of approximately 45.8%.
The deal is consistent with United Rentals’ “grow the core” strategy, and legacy H&E customers will benefit from one-stop access to United Rentals’ specialty rental offerings across Fluid Solutions, Matting Solutions, Onsite Services, Portable Storage & Modular Space, Power & HVAC, Tool Solutions, and Trench Safety. And H&E’s fleet, experienced employees, and customer service footprint of branches across 30+ strategic U.S. states complement United Rentals’ existing network. Notably, the combination will increase capacity for United Rentals in key U.S. geographies.
This combination will expand United Rentals’ rental fleet by almost 64,000 units with an original cost of over $2.9 billion, an average age of under 41 months, and roughly $230 million of non-rental fleet.
United Rentals and H&E share many cultural attributes, including a strong focus on safety, a customer-first business philosophy, and the best talent development and retention practices. Critically, H&E employees will bring a wealth of experience to United Rentals and will have more significant opportunities for career development within the larger combined organization.
The purchase price of about $4.8 billion is based on a multiple of 6.9x adjusted EBITDA for the trailing 12 months ended September 30, 2024, or 5.8x adjusted EBITDA, including $130 million of targeted cost synergies and the net present value of tax attributes estimated at approximately $54 million.
This combination is expected to generate approximately $130 million of annualized cost synergies within 24 months of closing, primarily in corporate overhead and operations. Additionally, United Rentals expects to realize procurement savings of approximately 5% as compared to historical H&E pricing.
United Rentals expects to realize about $120 million of annual revenue cross-sell synergies by year three as legacy H&E customers take advantage of United Rentals’ specialty rental offerings.
This acquisition is expected to be accretive to United Rentals’ adjusted earnings per share and free cash flow generation in its first-year post-close.
The boards of directors of United Rentals and H&E unanimously approved the transaction, which is subject to customary closing conditions.
Sullivan & Cromwell acted as the company’s legal advisor. And Morgan Stanley Senior Funding, Inc. and Wells Fargo have provided committed bridge financing. BofA Securities acted as financial advisor to H&E and Milbank acted as H&E’s legal advisor.
KEY QUOTES:
“In H&E we’re acquiring a well-run operation that’s primed to benefit from our technology, operations and broad value proposition. Most importantly, we’re gaining a great team that shares our intense focus on safety and customer service. We’ll be working side-by-side throughout the integration to capitalize on best-in-class expertise from both sides. We will use our well-honed integration playbook as we prepare the acquired branches to take full advantage of our systems and operational capabilities, and gain from our employee and customer-centric culture. I look forward to welcoming our new team members upon the closing of the acquisition.”
“This purchase of H&E supports our strategy to deploy capital to grow the core business and drive shareholder value. This acquisition allows us to better serve our customers with expanded capacity in key markets while also providing the opportunity to further drive revenue through our proven cross-selling strategy. Not only does the agreement satisfy the rigorous strategic, financial and cultural standards we set for acquisitions, but it also drives attractive returns for our shareholders.”
- Matthew Flannery, chief executive officer of United Rentals
“I’m extremely proud of what we’ve built at H&E over the last 60 years and am confident that our combination with United Rentals will take the business to new heights going forward.”
- Bradley W. Barber, chief executive officer of H&E
“I couldn’t be more pleased with this win-win outcome for both organizations, our customers and our shareholders. Importantly, I want to thank our employees for driving the results that made this transaction possible. I am confident that we’ve found an excellent landing spot for them and I am excited for the new opportunities they will have as part of United Rentals.”
- John M. Engquist, Executive Chairman of H&E
