Herc Holdings Inc. Acquires H&E Equipment Services for $4.8B

By Tamara Parker • Monday, May 12 10:15 • Permanent Link

Herc Holdings Inc. has recently announced its definitive agreement to acquire H&E Equipment Services, Inc. for a total enterprise value of $4.8 billion. This acquisition is expected to bring about a combined total enterprise value of over $12 billion, with pro forma revenue and adjusted EBITDA for the last twelve months (LTM Q1 2025) amounting to approximately $5.1 billion and $2.3 billion, respectively.

The transaction is set to be funded through a combination of equity issued to H&E shareholders, a draw under an upsized and extended $4,000 million 5-Year ABL Revolving Credit Facility, a $750 million 7-Year Term Loan B, and $2,750 million of new unsecured debt. Following the transaction, the company's pro forma net first lien and synergized net leverage are expected to be 1.6x and 3.6x, respectively, with LTM Q1 2025 adjusted EBITDA (Synergized) of approximately $2.3 billion.

The combined company will boast over 600 branches and a fleet original equipment cost of $10 billion as of December 31, 2024. Additionally, management has expressed a commitment to prioritizing deleveraging within Herc’s publicly-stated 2.0x-3.0x net leverage ratio target.

The acquisition of H&E Equipment Services, Inc. is expected to bring about an extended customer diversification for Herc Holdings Inc. H&E has a strong construction customer base, with 36% of FY 2024 revenues coming from this segment. Additionally, H&E's solid industrial customer base, accounting for 26% of FY 2024 revenues, includes blue-chip customers in industrials and the oil and gas market, offering opportunities for Herc to add to these strategic end-markets. Herc is also eyeing new verticals such as restoration and other specialty contractors, aerospace, automotive/EV, energy/renewables, and food & beverage.

The combined fleet portfolio of the two companies presents an opportunity for cross-selling in specialty equipment, with the current combined company original equipment cost showing a growth of approximately 93% since 2016. This growth is supported by an increase in the specialty mix of approximately 6% since 2016.

Furthermore, the acquisition is expected to position the combined company to capitalize on mega project opportunities, with an estimated $547 billion worth of 2025 projects and a government stimulus supporting the equipment industry rental share opportunity.

The company has illustrated disciplined capital management, exemplified by ample liquidity, extended maturities, and credit ratings from S&P and Moody's. Additionally, Herc Holdings Inc. has provided a reconciliation of its net income to adjusted EBITDA and EBITDA margin for the years 2020-2024, as well as a calculation of its pro forma net leverage ratio.

Following these announcements, the company's shares moved -1.61%, and are now trading at a price of $121.52. For the full picture, make sure to review HERC HOLDINGS INC's 8-K report.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.