United Rentals Enters Agreement to Acquire Ahern Rentals for $2B



United Rentals entered into an agreement to acquire the assets of the family-owned Ahern Rentals, founded in 1953, for roughly $2 billion in cash. The transaction is expected to close before the end of 2022, subject to customary conditions. The board of directors of United Rentals unanimously approved the transaction. For the trailing 12 months ended Sept. 30, 2022, Ahern Rentals generated $310 million of adjusted EBITDA on $887 million of total revenue.

Strong Strategic Rationale

Consistent with United Rentals’ “grow the core” strategy, customers of both companies will be better served by the combined scale, and legacy customers of Ahern Rentals will benefit from one-stop access to United Rentals’ specialty rental offerings. Ahern Rentals’ customer service footprint of branches, fleet and experienced employees is complementary with United Rentals’ existing network. The combination will increase capacity for United Rentals in key geographies, with concentrations on both U.S. coasts and in the Gulf region.

The combination will expand the fleet available to United Rentals customers by over 60,000 rental assets with an original cost of $1.85 billion, as well as approximately $145 million of non-rental fleet. Notably, over 75% of Ahern Rentals’ rental fleet is comprised of high-demand aerial and material handling equipment. The integration of the acquired branch and sales operations represents significant opportunities to improve efficiency, productivity and new business development with the adoption of United Rentals technology and field management processes.

Strong Financial Rationale

The purchase price of approximately $2 billion represents a multiple of 6.5x adjusted EBITDA for the trailing 12 months ended Sept. 30, 2022, or 4.5x adjusted EBITDA net of cost synergies and the net present value of tax attributes estimated at $426 million.

The acquisition is expected to be accretive to United Rentals’ adjusted earnings per share and free cash flow generation in its first year post-close. The transaction is projected to result in a net leverage ratio at year-end 2022 at the low end of the company’s target range: 2.1x adjusted EBITDA as-reported and 2.0x on a pro forma basis.

Return on invested capital is expected to exceed the cost of capital within 24 months of closing on a run-rate basis, with an attractive IRR and NPV. Importantly, the return profile of the transaction is compelling across a range of macro scenarios. United Rentals expects to realize approximately $60 million of annual revenue synergies by year three, led by the cross-selling of its specialty rental offerings to an expanded customer base.

The transaction is not conditioned on financing. United Rentals expects to use a combination of newly issued debt and existing capacity under its ABL facility to fund the transaction and related expenses.

The company currently plans to pause its $1.25 billion share repurchase program through the initial phase of the integration, consistent with its approach during the integrations of similarly sized general rental transactions.

“Our acquisition of Ahern Rentals supports our strategy to deploy capital to grow the core business and drive shareholder value,” Matthew Flannery, chief executive officer of United Rentals, said. “We view ourselves as the ideal owner of these assets within our network, as customers will benefit from the combination of the two organizations moving forward together. We’re leveraging our competencies in larger-scale M&A to augment both our near- and long-term earnings power.”

“Our integration playbook is underway so we can prepare the acquired branches to take full advantage of our systems and operational capabilities, and gain from our employee and customer-centric culture,” Flannery said. “I look forward to welcoming our new team members upon the closing of the acquisition.”

“I’m proud of what we’ve built at Ahern Rentals over nearly seven decades, and I’m extremely pleased that the combination with United Rentals will take the business forward in this next chapter of growth,” Don Ahern, chief executive officer of Ahern Rentals, said. “I want to thank our employees for driving the results that make this transaction possible. This is a strong outcome for both organizations and our customers.”

Sullivan & Cromwell LLP acted as legal advisor to United Rentals.

Key Statistics of the Acquisition

Financial data in $ millions
Purchase Price $ 2,000
Present Value of Acquired Tax Assets $ 426
Total Revenues (LTM 9/30/22) $ 887
Adjusted EBITDA (LTM 9/30/22) $ 310
Estimated Annualized Cost Synergies Achieved in Year Two $ 40
Estimated Annualized Cross-Selling Benefits Achieved by End of Year Three $ 60
Original Equipment Cost of Acquired Rental Fleet $ 1,850
Non-Rental Fleet $ 145
Employees ~2,100
Rental Branches 106
Customers ~44,000

 


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