WillScot Mobile Mini Holdings (a leader in innovative temporary space solutions) announced it has entered into a definitive agreement to acquire McGrath RentCorp (a leading business-to-business rental company based in Livermore, California). This acquisition will advance WillScot Mobile Mini’s position as a North American leader in turnkey space solutions with a complementary geographic footprint and a more diversified platform, providing enhanced value across key customer segments.
McGrath is a leading provider of temporary and permanent space solutions throughout the US. And this complements WillScot Mobile Mini’s broad North American footprint and 80-year history as an innovative space solutions provider.
The combined company will serve over 85,000 customers, benefitting from the expanded distribution of Value-Added Products and Services, enabling turnkey space solutions and further commercial and operating synergies from the combined branch resources and infrastructure. The combined sales organization and customer base will also have access to the broadest offering of space solutions and supporting operational expertise in the industry today. The company is expecting that the combination will be accretive to earnings per share within twelve months post-closing, based on the Company’s successful track record of integrating acquisitions.
The benefits of the transaction include:
1.) The acquisition brings together two complementary businesses, enhancing diversity across customer segments. The combined company’s broad offering, attractive unit economics and long rental durations underpin its uniquely predictable recurring cash flow profile. On a pro forma basis, approximately 90% of combined total revenue is derived from leasing and related services, while the addition of Enviroplex expands WillScot Mobile Mini’s permanent modular capabilities.
2.) $50 million of run-rate operating synergies expected to be achieved within 24 months of closing. Confidence in targets reinforced by WillScot Mobile Mini’s long history of successful M&A integrations.
3.) The combined customer base and rental fleet represent an expanded platform for the rollout of WillScot Mobile Mini’s strategic levers, such as Value-Added Products and Services, cross-selling and commercial best practices, and operations excellence. Together, these provide a clear path to multiple years of sustained growth and margin expansion.
4.) The combined company’s strengthened financial profile, enhanced cash generation and de-leveraging capability, and disciplined capital allocation amplify WillScot Mobile Mini’s ability to reinvest in growth and compound returns.
5.) The combined company will have a strengthened financial profile, with combined 2023 revenues of $3.2 billion and adjusted EBITDA of $1.4 billion, including run-rate operating synergies. And the combined company expects to capture additional revenue synergies and fleet efficiencies through its combined commercial and branch operations and by leveraging WillScot Mobile Mini’s best-in-class technology platform.
WillScot Mobile Mini expects the combined company will generate about $700 million of annual free cash flow by end of the first full year following closing, with significant further accretion to free cash flow margins over time.
Deal Details
McGrath’s shareholders will receive for each of their shares either $123.00 in cash or 2.8211 shares of WillScot Mobile Mini common stock, as determined pursuant to the election and allocation procedures in the merger agreement under which 60% of McGrath’s outstanding shares will be converted into the cash consideration and 40% of McGrath’s outstanding shares will be converted into the stock consideration. The deal values McGrath at an enterprise value of $3.8 billion, including approximately $800 million of net debt, and the per-share consideration represents a premium of 10.1% to McGrath’s closing stock price on January 26, 2024.
McGrath’s shareholders will participate in the significant value-creation opportunity from the transaction through approximately 12.6% ownership stake in the combined company and its track record of value creation through synergy realization. And McGrath shareholders will also benefit from a tax-free reorganization under IRC Section 368 for the stock portion of the merger consideration.
WillScot Mobile Mini secured committed financing for the transaction by way of a $1.75 billion senior secured bridge credit facility, which along with borrowings under WillScot Mobile Mini’s ABL revolving credit facility (ABL Facility) will fund the cash portion of the purchase price and the repayment of McGrath’s outstanding debt. In addition, WillScot Mobile Mini has secured commitments to upsize its existing $3.7 billion ABL Facility by $750 million to $4.45 billion.
WillScot Mobile Mini is committed to deleveraging and expects to achieve pro forma net leverage within the company’s target range of 3x – 3.5x within 12 months post-closing.
All directors for the respective Boards of WillScot Mobile Mini and McGrath adopted and approved the transaction. The deal is expected to close in the second quarter of 2024 and is subject to approval by McGrath shareholders, regulatory approvals and other customary closing conditions.
KEY QUOTES:
“I’m excited to welcome the McGrath team to the WillScot Mobile Mini family. The transaction will further accelerate our growth, with combined 2023 pro forma revenue of $3.2 billion and adjusted EBITDA of $1.4 billion, we will be on path to achieve a $700 million free cash flow run-rate twelve months after we close. Meanwhile, our $1 billion of idiosyncratic growth levers remain in flight, many of which will increase proportionally with the close of the transaction. Among the abundant stockholder benefits associated with this transaction, I am most excited with the prospect of extending our innovative and expansive Value-Added Products portfolio, and our unique FLEX, Cold Storage and Clearspan Space Solutions to McGrath customers. Our long-term capital allocation framework remains unchanged as we continue to accelerate our robust organic growth with highly accretive M&A, all the while creating long-term value for our shareholders.”
– Brad Soultz, Chief Executive Officer of WillScot Mobile Mini
“This combination provides McGrath customers and employees a platform for continued growth and success, while providing McGrath shareholders with immediate cash value as well as participation in the upside potential of the combined company. This transaction validates the strength of our business, the hard work and dedication of our team members and the valuable solutions McGrath provides to our customers. For more than 40 years, we have pursued a relentless customer-centric approach and we look forward to extending our ability to provide the solutions that our customers so highly value.”
– Joseph Hanna, President and Chief Executive Officer of McGrath
