United Rentals announced that it has entered into a definitive agreement to acquire Yak Access, LLC, Yak Mat, LLC and New South Access & Environmental Solutions, LLC (collectively Yak) from Platinum Equity for about $1.1 billion in cash. The deal is expected to close in the first quarter of 2024, subject to limited contractual conditions.
Yak is a leader in the North American matting industry with a fleet of about 600,000 hardwood, softwood, and composite mats providing surface protection across both construction and maintenance, repair and operations (MRO) applications. And Yak predominantly serves customers in the utility and midstream verticals. For the year ended December 31, 2023, Yak generated $171 million of adjusted EBITDA on $353 million of adjusted revenue across over 40 U.S. states.
United Rentals expects to use a combination of new debt financing and existing capacity under its ABL facility to fund the transaction and related expenses.
Strategic Rationale
1.) Yak creates a new adjacency for United Rentals’ Specialty business with scale in a large and growing segment. This combination will further the company’s ability to deliver value as a one-stop-shop for customers.
2.) Yak provides immediate cross-sell opportunities to both existing and new customers across construction and MRO applications.
3.) Yak shares many cultural similarities with United Rentals, including a customer-first business philosophy, long-term customer relationships and a strong focus on safety.
Financial Rationale
1.) United Rentals sees significant potential to grow the matting business over the next several years, supported by attractive secular opportunities across both the energy and power markets, funded by public and private investments.
2.) The company expects to realize approximately $166 million in net present value of tax benefits included in the $1.1 billion purchase price.
3.) The company expects to realize a $7 million benefit to adjusted EBITDA, equivalent to approximately 2% of Yak’s adjusted revenue for 2023, by the end of year two after closing from cost synergies via operational efficiencies and overhead savings.
4.) The purchase price represents a multiple of 6.4 times adjusted EBITDA for 2023, and an adjusted purchase multiple of 5.2 times, net of tax benefits and cost synergies.
5.) The company expects the acquisition to be immediately accretive to earnings per share (EPS) and free cash flow (FCF) with an attractive return profile.
6.) The company expects a pro forma leverage ratio of approximately 1.7 times at closing, taking into account the expected debt financing to fund the acquisition and Yak’s adjusted EBITDA. This is within the company’s target range of 1.5-2.5 times.
7.) The transaction structure also provides for the potential for additional cash consideration to be paid to the seller, with a maximum payout of $50 million based on revenue attainment in the first two years after closing.
Sullivan & Cromwell LLP acted as United Rentals’ legal advisor in the transaction.
KEY QUOTES:
“Our acquisition of Yak further diversifies and differentiates United Rentals’ Specialty business offerings while also driving shareholder returns. This newly created “Matting Solutions” business will create another adjacency for our company with scale in a large and growing market segment. In addition to its attractive profile across growth, margins and returns, this combination builds upon our Power vertical strategy, where significant investment in generation, transmission and distribution is expected over the next several decades.”
“Yak meets the strategic, financial and cultural criteria we aim for in acquisitions. We expect this new line of business to augment our Specialty offerings as we continue to execute on our strategy of further differentiating ourselves by providing one-stop shop capabilities for our customers. We look forward to welcoming our new team members to the United Rentals family.”
- Matthew Flannery, president and chief executive officer of United Rentals
“Yak is excited to accelerate its business potential as part of United Rentals. This combination will benefit both our customers and existing employees as our established expertise in access solutions complements the broader value proposition United Rentals offers. I’m proud of the leading company we built and am happy we found a great partner for the next chapter.”
- Frank Bardonaro, CEO of Yak
“Over the past six years we worked with the Yak team to transform the business and are proud that it is now a stronger and more resilient company ready for the next chapter. United Rentals is an outstanding partner and a great long-term fit for Yak going forward.”
- Jacob Kotzubei, co-president of Platinum Equity and Matthew Louie, Managing Director, Platinum Equity
