Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, H&E will pay $21.07 in cash per share of Neff common stock, for a total enterprise value of approximately $1.2 billion, including approximately $690 million of net debt. The per share merger consideration payable to Neff stockholders is subject to certain downward adjustments, not to exceed $0.44 per share, in the event that H&E incurs certain increased financing costs due to the transaction not being consummated on or prior to January 14, 2018. The transaction is expected to close in late Q3/17 or early Q4/17, and is subject to customary closing conditions including Hart-Scott-Rodino Act clearance.
John Engquist, H&E’s CEO, said, “This agreement accelerates our stated strategy to expand our footprint across the United States as we seek to penetrate and grow our business in strategic business segments. Further, this transaction will bring together what we believe to be two highly complementary businesses that share a commitment to addressing the increasingly complex equipment needs of our customers. Our broader geographic footprint and enhanced capabilities in strategic markets, coupled with complementary expertise across equipment categories, are expected to help us to achieve our growth goals. We look forward to welcoming Neff’s talented employee base to the H&E family, and to offering more coverage and capabilities to support our combined customer base.”
The acquisition will nearly double the number of H&E branches, from 78 to 147. As of March 31, 2017, the companies’ combined fleet totaled $2.2 billion based on original equipment cost (OEC) and consisted of 43,749 units. As of March 31, 2017, the earthmoving fleet of H&E and Neff on a combined OEC basis totaled $727 million and consisted of 8,736 units.
Neff CEO Graham Hood said, “We are looking forward to joining an industry leader who shares our core values, including our commitment to providing customers with best-in-class equipment services and solutions. Neff offers H&E a talented, experienced and knowledgeable employee base that we expect will continue to maintain and develop relationships with key customers and contribute to the combined company’s growth. I would like to thank our 1,160 employees across the country, who are the driving force behind our business. Today’s announcement is a testament to the value that they have helped to create for our stakeholders.”
H&E estimates the acquisition will create $25 to $30 million of synergies annually related to corporate overhead, systems and operational efficiencies, as well as scale benefits for equipment purchases. The acquisition of Neff is expected to generate in excess of $800 million of gross tax assets for H&E arising from a step-up in the basis of certain of Neff’s assets.
Wells Fargo Bank and affiliated entities have agreed to provide committed financing for the transaction, subject to customary conditions. The transaction is not subject to a financing condition.
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