After United Rentals, Inc. announced that it will acquire H&E Equipment Services, Inc. (NASDAQ: HEES), the company’s stock price is rocketing on the US stock charts. HEES shares were trading at $90.32 as of the most recent check, an astounding 105.55% gain.
A Strategic Fit
The deal puts HEES at a valuation of $92 per share in cash, which translates to an enterprise value of about $4.8 billion, including $1.4 billion in net debt. With 160 branches in more than 30 U.S. states, H&E Equipment, d/b/a H&E Rentals, was founded in 1961 and provides a wide range of general and specialist rental equipment to the construction and industrial markets.
With an average age of less than 41 months, the combination will increase United Rentals’ fleet by about 64,000 units, valued at $2.9 billion. Furthermore, HEES’ current staff of about 2,900 workers will support development prospects and offer knowledge to the bigger firm.
Cost and Revenue Synergies to Drive Value
United Rentals anticipates generating approximately $130 million in annualized cost synergies within two years of the deal’s closure. These savings are expected from streamlined corporate overhead, operational efficiencies, and procurement improvements.
Furthermore, cross-selling opportunities are projected to add $120 million in annual revenue by the third year, as H&E Rentals’ customer base leverages United Rentals’ specialty rental services. The acquisition also bolsters United Rentals’ financial position, targeting a pro forma net leverage ratio of 2.3x at closing. The company plans to reduce this ratio to approximately 2.0x within 12 months post-acquisition.
Transaction Terms and Next Steps
The agreement includes a 35-day “go shop” period, allowing H&E Rentals to explore superior proposals. In order to expedite the acquisition, United Rentals has obtained bridging financing, which is anticipated to conclude quickly after regulatory approval.
United Rentals’ position as a leader in the equipment rental sector is cemented by this purchase, which marks a turning point for both businesses and emphasizes similar principles in safety, customer attention, and talent development.
Further Insight
HEES stock, boasting a trailing twelve-month profit margin of approximately 10% and an ST score of 35, has received a solid “Buy” recommendation from 17 out of 25 analysts covering it. HRI and ALTG are other companies in the same industry that have comparable ratings; to learn more about the stocks in the industry, check our screener page.