United Rentals and BakerCorp entered into a definitive agreement under which United Rentals will acquire BakerCorp for approximately $715 million in cash. The boards of directors of United Rentals and BakerCorp unanimously approved the agreement. The transaction is expected to close in Q3/18.
BakerCorp is a multinational provider of tank, pump, filtration and trench shoring rental solutions for a broad range of industrial and construction applications. The company has approximately 950 employees serving more than 4,800 customers in North America and Europe.
“We’re very pleased to announce an agreement to acquire BakerCorp, an expert in fluid solutions and a highly regarded, customer-focused operation,” said Michael Kneeland, CEO of United Rentals. “We’re gaining a terrific team that shares our strong commitment to safety and customer service, and operations that complement our North American pump and trench offerings. This transaction will also be our company’s first experience in Europe, where BakerCorp has established an attractive, fast-growing business with significant future opportunity.”
BakerCorp’s operations are primarily concentrated in the U.S. and Canada, where it has 46 locations, with another 11 locations in France, Germany, the UK and the Netherlands. For the trailing 12 months ended May 31, 2018, BakerCorp generated $79 million of adjusted EBITDA at a 26.9% margin on $295 million of total revenue.
The company plans to update its 2018 financial outlook to reflect the combined operations after the transaction is complete.
“We set a high bar across strategic, financial and cultural metrics when evaluating any acquisition. BakerCorp met every test, with the additional advantage of being primed to benefit from our systems and technology,” Kneeland said. “We expect the combination to augment our revenue, earnings and EBITDA in 2018, while propelling the growth of one of our most promising specialty segments.”
The combined company will serve a larger strategic account base with a broader fleet range, including approximately 24,000 units to be acquired at closing.
The combination of BakerCorp’s solutions across fluid storage, transfer and treatment with United Rentals’ Pump Solutions unit will create an enhanced value proposition for customers across the broader fluid solutions space, with market-leading revenue of approximately $606 million (pro forma trailing 12 months).
The integration of BakerCorp into United Rentals will give the acquired locations access to United Rentals’ systems and technology, as well as process and data-driven efficiencies. The combined operations are expected to create approximately $19 million in direct cost synergies across corporate overhead and shared services.
BakerCorp’s international operations, which accounted for approximately 15% of total revenue for its fiscal year ended January 31, 2018, provide an entry into select European markets for the rental of fluid solutions.
The purchase price of $715 million represents a multiple of 9.0x adjusted EBITDA for the trailing 12-month period ended May 31, 2018, and an adjusted purchase multiple of 6.6x, including tax benefits and cost synergies.
The acquisition is expected to be accretive to adjusted earnings per share with an internal rate of return and run-rate ROIC exceeding cost of capital within 36 months after closing. The company expects its net leverage ratio to be approximately 2.5x at year-end 2018 and remains committed to executing its recently announced $1.25 billion share repurchase authorization.
The transaction is not conditioned on financing. United Rentals expects to use a combination of cash and existing capacity under its ABL facility to fund the transaction and related expenses.
Centerview Partners acted as financial advisor to United Rentals and Sullivan & Cromwell acted as legal advisor. Morgan Stanley acted as financial advisor to BakerCorp and Fried Frank acted as legal advisor.
“I’m extremely proud of what our team has built,” said Bob Craycraft, president and CEO of BakerCorp. “The value we’ve delivered for our customers has created this new opportunity to be part of the largest equipment rental company in the world. The combination with United Rentals is an exciting development for the future of both our customers and employees.”
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