United Rentals, an equipment rental company, continued its acquisition spree and will acquire General Finance for $19 per share in cash resulting in an enterprise value of $996 million, including taking on a net debt of $400 million. General Finance Corp. is a specialty rental services company.
Shares of General Finance (GFN) jumped 55.9% in morning trading on the news of the acquisition.
United Rentals’ (URI) President and CEO, Matthew Flannery 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.”
This acquisition is projected to close in the second quarter of this year and is expected to be accretive to EPS and free cash flow.
The acquisition is anticipated to create cross-selling opportunities for URI as General Finance operates in 52 of the top 100 Master Service Agreements (MSAs) markets in North America. URI will also be able to offer mobile storage and modular office solutions in its current markets, not served by GFN.
The transaction will enable URI to gain entry into Australia and New Zealand geographies as GFN already has a footprint in these markets. (See United Rentals stock analysis on TipRanks)
URI aims to achieve total revenue synergies of $65 million in the first three years post the closing of the acquisition and expects that its adjusted EBITDA would benefit by $17 million through cost synergies at the end of year two from close.
Following the acquisition announcement, Oppenheimer analyst Scott Schneeberger reiterated a Hold rating on the stock. Schneeberger commented on the acquisition, “URI has been pursuing an enhanced mix of Specialty Rental for over a decade, and we’ve had insight to (higher multiple) portable storage container/modular office rentals being near the top of its list over that period.”
“GFN has long been a meaningful North American competitor in its Specialty Rental industry, particularly portable storage container rental, and regarded as a strong operator. We respect GFN’s founder and management team, and view the company’s pairing with URI as a win-win transaction,” Schneeberger added.
Consensus among analysts is a Moderate Buy based on 6 Buys, 4 Holds, and 2 Sells. The average analyst price target stands at $324.64 and implies downside potential of 1.1% to current levels.
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