United Rentals has reached an agreement to acquire H&E Equipment Services in a significant all-cash transaction valuing approximately $4.8 billion, which encompasses around $1.4 billion in debt. This strategic move is designed to enhance United Rentals' capacity in the competitive US equipment rental market. According to the announced terms, United Rentals is set to initiate a tender offer by January 28, proposing to buy all outstanding shares of H&E at a price of $92 each in cash.
Following this offer, United Rentals plans to execute a second-step merger to acquire any remaining shares at the same cash valuation. This development resulted in H&E's stock surging by 106% during premarket trading, while United Rentals saw a modest gain of 4%. H&E services the construction and industrial sectors with an extensive footprint, boasting 160 branches across 30 states in the United States.
The firm has approximately 2,900 employees and a rental fleet valued at $2.9 billion at original cost. With this acquisition, United Rentals anticipates a substantial enhancement in its operational capacity across critical markets in the US, leading to a significant increase in its fleet by nearly 64,000 units. "This purchase of H&E aligns with our strategic objectives to effectively deploy capital for core business growth and bolster shareholder value," stated United Rentals' Chief Executive Matthew Flannery.
"By integrating H&E into our operations, we will be able to provide our clients with improved service capabilities while leveraging our existing strategies to drive additional revenue through cross-selling." The acquisition is contingent upon a minimum tender representing a majority of H&E shares and is projected to be finalized within the current quarter.
It also allows for a 35-day 'go-shop' provision, expiring February 17, during which H&E can explore and terminate the agreement for a potentially superior acquisition proposal. H&E's Executive Chairman, John Engquist, expressed his confidence in the acquisition, stating, "I couldn't be more pleased with this win-win outcome for both organizations, our customers, and our shareholders.
I am confident that we've found an excellent landing spot for them and I am excited for the new opportunities they will have as part of United Rentals." The financial projections indicate that the deal will be accretive to United Rentals' adjusted earnings and free cash flow within the first year following its completion.
Expected cost synergies are estimated at about $130 million annually within 24 months of the deal closure, primarily in corporate overhead and operations. Additionally, United Rentals projects $120 million in annual revenue synergies from cross-selling efforts by the third year post-acquisition. To finance the transaction, United Rentals intends to employ a combination of newly issued debt, borrowings, and available capacity from its asset-based lending framework.
Importantly, the company does not foresee this acquisition affecting its current dividend program. Once the acquisition is concluded, United Rentals plans to revise its outlook for 2025 to incorporate the impact of this strategic transaction..