United Rentals (URI) to Acquire General Finance (GFN) for $19/share in $996 Million Deal

April 16, 2021 6:08 AM EDT
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United Rentals, Inc. (NYSE: URI) (“United Rentals” or “the company”) and General Finance Corporation (NASDAQ: GFN) (“General Finance”) today announced their entry 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.

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 leading provider of mobile storage and modular office space. Its network of 106 branches and over 900 employees serves diverse end markets, including construction, commercial, industrial, retail, transportation, petrochemical, consumer, natural resources, governmental and education.

As of December 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, 2021, to acquire all of the outstanding shares of GFN 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 the second quarter of 2021. The company plans to update its 2021 financial outlook to reflect the combined operations following the completion of the transaction.

Strong Strategic Rationale

  • General Finance’s positioning as a leader in the North American sector for mobile storage and office solutions strongly complements United Rentals’ leading positions in general construction and industrial rentals and specialty rentals. This will further differentiate the company through its ability to deliver value as a one-stop-shop for customers.
  • General Finance operates in 52 of the top 100 MSAs in North America served by United Rentals locations, which will create immediate cross-sell opportunities. Importantly, United Rentals will have the ability to introduce mobile storage and modular office solutions in its MSAs currently not served by General Finance.
  • General Finance’s mobile storage and office business in Australia and New Zealand will give United Rentals entry into these geographies with an established platform run by a seasoned management team, and with a strong growth strategy already in place.
  • General Finance shares many cultural similarities with United Rentals, including a customer-first business philosophy, long-term customer relationships across diverse end markets and a strong focus on safety.
  • Approximately 900 General Finance employees will bring a wealth of experience to United Rentals in the combination. They will benefit from industry-leading technology, state-of-the-art training and safety programs and other resources, and have greater opportunities for career development within the larger company.

Robust Financial Drivers

  • United Rentals sees significant potential upside to profitability from the transaction over the next several years, driven by synergies within the combined operations, complementary services, efficiencies of scale and an aggressive growth strategy. The company is targeting $65 million of total revenue synergies in the first three years post-close.
  • The company 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.
  • The company 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 9.0 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.
  • The company expects to maintain an as-reported leverage ratio of less than 2.5 times net debt to EBITDA at closing, and a pro forma leverage ratio of less than 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 ABL facility to fund the transaction and related expenses.

CEO Comments

Matthew Flannery, president and chief executive officer of United Rentals, said, “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. We see strong growth potential from this combination, including our ability 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.”

Flannery continued, “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.”

Jody Miller, chief executive officer of General Finance, commented, “Our combination with United Rentals — the industry leader in equipment rentals — is a strong outcome for everyone involved. 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.”

Key Acquisition and Transaction Statistics
Financial information in $ millions

Purchase Price

$

996

Present Value of Acquired Tax Assets

$

19

Total Revenue (full-year calendar 2020)

$

346

Adjusted EBITDA (full-year calendar 2020)

$

94

Estimated Annualized Cost Synergies Achieved by End of Year Two

$

17

Estimated Annualized Cross-selling Benefits Achieved by End of Year Three

$

65

Original Equipment Cost of Fleet

$

639

Number of Rental Units

~100,000

Employees

~930

Rental Branches

106

Customers

~50,000

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

Conference Call

United Rentals will hold a conference call tomorrow, April 16, 2021, at 8:30 a.m. Eastern Time. The conference call number is (855) 458-4217 (international: (574) 990-3618). The replay of the call can be accessed at (404) 537-3406, passcode 7279967.

Non-GAAP Measures

General Finance’s adjusted EBITDA is a non-GAAP financial measure as defined under the rules of the Securities and Exchange Commission. United Rentals believes that this non-GAAP financial measure provides useful information about the proposed transaction; however, it should not be considered as an alternative to GAAP net income. A reconciliation between General Finance’s adjusted EBITDA and GAAP net income, as well as other financial data, is provided in the investor presentation available on the company’s website.



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