For $4.2 billion, United Rentals Inc. is acquiring a controlling stake in the parent company of RSC Holdings Inc., one of its three primary rivals whose equipment rental business focuses on industrial and construction customers.
Greenwich-based United Rentals is assuming $2.3 billion in RSC debt as part of the transaction. Scottsdale, Ariz.-based RSC earned $16 million in the third quarter on sales of $407 million, up 22 percent from a year ago, while United Rentals earned $65 million on a 19 percent gain in sales to $713 million.
Along with Hertz Equipment Rental Corp. and Sunbelt Rentals, United Rentals and RSC Equipment Rental control nearly a quarter of the national market according to the American Rental Association, with smaller regional and local companies divvying what remains a fragmented market. In 2006, RSC was acquired by an investment syndicate led by Oak Hill Capital, which controls a third of its shares today.
It marks by far the largest transaction for United Rentals since the company itself reached a 2007 leveraged buyout deal with affiliates of Cerberus Capital Management L.P., only to see the financiers back away from it. United Rentals sued to force Cerberus to complete the transaction, and unsuccessful, instead took a $100 million acquisition termination fee.
In United Rentals newest deal, RSC shareholders will control 30 percent of the combined company, and will add three directors to the United Rentals board.
“We”™ve been fierce competitors,” said Michael Kneeland, CEO of United Rentals, in a December conference call with investment analysts. “Down to the branch level, they focus on the customer and it”™s about how they treat that customer ”¦ There”™s a lot of good things that both companies do.”
Since 2007, the year Kneeland was promoted to CEO, United Rentals has cut a whopping 4,700 jobs, shrinking its workforce by nearly 40 percent, even as he accepted a $1 million boost in compensation in 2010 after a corresponding decrease the year before. United Rentals stock was on track to finish among the top 10 gainers among local companies in 2011, and rose further following the announcement of the RSC acquisition.
If United Rentals has contracted nationally, it made an important addition to Bridgeport”™s economy in 2009, taking state incentives to open an operations center there that is its largest in New England. United Rentals selected a contaminated Bridgeport Brass property that had been idle since 1980.
In RSC, which employed more than 4,400 people entering 2011, United Rentals stands to recover much of its lost workforce ”“ depending on how many people it chooses to retain.
The companies expect to save $200 million annually after completing the transaction, without immediately specifying what impact that will have on their respective workforces. RSC has just one store in Connecticut, in New Britain.
