United Rentals and General Finance entered into a definitive agreement under which United Rentals will acquire General Finance for $19 per share in cash, representing a total enterprise value of approximately $996 million, including the assumption of $400 million of net debt. The transaction is expected to be accretive to EPS and free cash flow upon close.

“Our acquisition of General Finance will be a significant opportunity for us to further differentiate our value in the eyes of our customers while providing attractive, long-term returns for our shareholders,” Matthew Flannery, president and CEO of United Rentals, said. “We see strong growth potential from this combination, including our ability [to] cross-sell mobile storage and office solutions to our customers. Our expansion into this space comfortably checks all three boxes of our M&A criteria — strategic rationale, financial impact and cultural fit.

“We’re confident the time is right to reengage in M&A with this highly strategic combination as our end markets recover from the challenges of 2020. General Finance is a customer-focused organization with excellent field operators and specialized expertise that complements our own. We look forward to welcoming our new employees and customers as an important part of our future.”

General Finance, which operates as Pac-Van and Container King in the U.S. and Canada and as Royal Wolf in Australia and New Zealand, is a provider of mobile storage and modular office space. Its network of 106 branches and more than 900 employees serves multiple end markets, including construction, commercial, industrial, retail, transportation, petrochemical, consumer, natural resources, governmental and education.

“Our combination with United Rentals — the industry leader in equipment rentals — is a strong outcome for everyone involved,” Jody Miller, CEO of General Finance, said. “Our customers will benefit from United’s extensive solutions and geographic footprint, and our employees will have new opportunities as part of the largest rental team in the world.”

As of Dec. 31, 2020, on a trailing 12-month basis, General Finance generated $94 million of adjusted EBITDA on $346 million of total revenue, translating to a 27.2% adjusted EBITDA margin. As of March 31, 2021, General Finance’s rental fleet consisted of approximately 100,000 units at an original cost of approximately $639 million.

The boards of directors of United Rentals and General Finance unanimously approved the transaction, which is subject to customary closing conditions, including the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other regulatory approvals.

United Rentals intends to commence a tender offer by April 26, to acquire all of the outstanding shares of General Finance common stock for $19 per share in cash. Following completion of the tender offer, a wholly-owned subsidiary of United Rentals will merge with and into General Finance and shares of General Finance common stock that have not been tendered and purchased in the tender offer will be converted into the right to receive $19 per share in cash. The transaction is expected to close in Q2/21. United Rentals plans to update its 2021 financial outlook to reflect the combined operations following the completion of the transaction.

United Rentals is targeting $65 million of total revenue synergies in the first three years post-close of the transaction. It also expects to realize a $17 million benefit to adjusted EBITDA by the end of year two from cost synergies achieved through the integration, including operational efficiencies and a reduction in corporate overhead. This is equivalent to 4.9% of General Finance’s trailing 12-months total revenue and 10.4% of the combined cost of leasing operations and selling and general expenses over the same period.

United Rentals also expects to realize approximately $19 million in net present value of tax benefits included in the $996 million purchase price. Net of synergies, the purchase price represents a multiple of nine times trailing 12-month adjusted EBITDA and an adjusted purchase multiple of 8.8 times, including the net present value of acquired tax benefits.

Return on invested capital is expected to exceed the cost of capital within 18 months of closing on a run-rate basis, with an attractive IRR and NPV.

United Rentals expects to maintain an as-reported leverage ratio of below 2.5 times net debt to EBITDA at closing and a pro forma leverage ratio of below 2.4 times at closing.

The transaction is not conditioned on financing. United Rentals expects to use a combination of cash and existing capacity under its asset-based lending facility to fund the transaction and related expenses.

Sullivan & Cromwell acted as United Rentals’ legal advisor in the transaction, and Morrison and Foerster acted as General Finance’s legal advisor.