United Rentals, From Failed Private Equity Buyout To Acquirer (URI, RRR)

United Rentals, Inc. (NYSE: URI) is a leftover public company from the wave of failed private equity buyouts (of Cerberus) right before the recession took hold.  As far as infrastructure building is concerned, it is the world’s top equipment rental company that serves the construction and industrial infrastructure market throughout North America.  Now it is making an acquisition of its own.

This morning came word that United Rentals is acquiring RSC Holdings, Inc. (NYSE: RRR), another equipment leasing outfit, for an enterprise value of $4.2 billion after the inclusion of $2.3 billion in net debt.  The cash-and-stock transaction values the company at $18.00 per share.  The boards of directors of both companies have also unanimously approved this buyout and are recommending that holders approve the proposed transaction.

If you look at the combined outfit, the claim is a more attractive business mix, with greater scale and with enhanced growth prospects. On paper, this is one of those mergers which actually seems to make sense if its cost savings and new growth segments can be executed upon.

United Rentals has a market cap of $1.6 billion before the effects of this deal and its $26.04 share price compares to a 52-week trading range of $12.81 to $34.78.  RSC Holdings, Inc. (NYSE: RRR) closed on Thursday at $11.37 and its 52-week trading range is $6.26 to $15.04 and its market capitalization was nearly $1.2 billion.  RSC briefly traded above $18.00 per share and went up to as high as $22.00 in 2007 before the recession kicked in.

JON C. OGG