United Rentals, Inc. (NYSE: URI) has recently announced its acquisition of H&E Equipment Services, Inc. (NASDAQ: HEES) for a total enterprise value of approximately $4.8 billion, including approximately $1.4 billion of net debt. H&E, founded in 1961, operates across 30 U.S. states and provides a comprehensive mix of high-quality general rental fleet including aerial work platforms, earthmoving equipment, material handling equipment, and other general and specialty lines of equipment. On a trailing 12-month basis through September 30, 2024, H&E generated $696 million of adjusted EBITDA on total revenues of $1,518 million, translating to an adjusted EBITDA margin of approximately 45.8%.
The acquisition is expected to expand United Rentals' rental fleet by almost 64,000 units with an original cost of over $2.9 billion and an average age of under 41 months, as well as approximately $230 million of non-rental fleet. Additionally, United Rentals expects to realize approximately $130 million of annualized cost synergies within 24 months of closing, primarily in the areas of corporate overhead and operations, and approximately $120 million of annual revenue cross-sell synergies by year three.
The transaction is expected to be accretive to United Rentals' adjusted earnings per share and free cash flow generation in its first year post-close. Return on invested capital (ROIC) is expected to reach the company’s cost of capital by the end of year three on a run-rate basis, with compelling internal rate of return (IRR) and net present value (NPV) across multiple macro scenarios. The acquisition is projected to result in a pro forma net leverage ratio at closing of approximately 2.3x and the company intends to reduce its leverage with a goal of reaching net-debt to EBITDA of approximately 2.0x within 12 months after acquisition close.
Matthew Flannery, Chief Executive Officer of United Rentals, expressed confidence in the acquisition, stating, "In H&E we’re acquiring a well-run operation that’s primed to benefit from our technology, operations and broad value proposition. Most importantly, we’re gaining a great team that shares our intense focus on safety and customer service."
Bradley W. Barber, Chief Executive Officer of H&E, also commented on the acquisition, stating, "I’m extremely proud of what we’ve built at H&E over the last 60 years and am confident that our combination with United Rentals will take the business to new heights going forward."
The transaction is subject to customary closing conditions and is expected to close in the first quarter of 2025. United Rentals intends to commence a tender offer by January 28, 2025, to acquire all outstanding shares of H&E common stock for $92 per share in cash. Today the company's shares have moved 105.7% to a price of $90.39. For more information, read the company's full 8-K submission here.
