United Rentals to buy BlueLine for $2.1bn in cash
By Michele Maatouk
Date: Monday 10 Sep 2018
(Sharecast News) - United Rentals has agreed to buy rival equipment rental company BlueLine from Platinum Equity for around $2.1bn in cash.
The deal, which is expected to close in the fourth quarter of this year, has been unanimously approved by United Rentals' board of directors.
BlueLine is one of the tenth largest equipment rental companies in North America, serving more than 50,000 customers in the construction and industrial sectors, with a focus on mid-sized and local accounts. For the 12 months to 31 August, the business generated around $313m of adjusted earnings before interest, taxes, depreciation and amortisation at a 39.8% margin on $786m of revenue.
United Rentals said BlueLine's footprint will increase its capacity in many of the largest metropolitan areas in North America, including both US coasts, the Gulf South and Ontario. It also pointed to BlueLine's "well-diversified customer base" and said this aligns well with its own base, with a balanced mix of commercial construction and industrial accounts.
The combination will add more mid-sized and local accounts to United Rentals' base and the addition of BlueLine's fleet will expand United Rentals' fleet by more than 46,000 rental assets.
The deal is expected to be immediately accretive to United Rentals' adjusted earnings per share and free cash flow generation and result in a net leverage ratio of below 3.0x by year-end 2018 on an as-reported basis, with a strong path for deleveraging thereafter. On a pro forma basis, the company expects its net leverage to be below 2.8x by year-end.
United Rentals' chief executive officer Michael Kneeland said: "The acquisition of BlueLine meets all of our criteria for long-term, profitable growth at attractive returns. We're executing our strategy of 'growing the core' in a strong demand environment to drive superior value for our customers and shareholders. Our company will be going to market with more talent, capacity and customer diversification than ever before.
"There are some distinct advantages to the BlueLine integration, such as our common technology systems and strong safety cultures. BlueLine has a fleet mix that complements our own, and a well-diversified base of mid-sized and local customers, many of whom can use our specialty solutions. We expect to complete the acquisition in the fourth quarter, setting the stage for an exciting 2019. I look forward to welcoming our new colleagues very soon."
RBC Capital Markets said: "Net, we view the transaction (URI's fourth sizeable deal since early 2017) as unsurprising, given its significant free cash flow generation and opportunity to further strengthen its leading position in the N. American equipment rental market, where we believe fundamentals remain healthy. We also see opportunity for URI to reduce costs/improve the performance of the acquired assets and cross-sell with its specialty platform.
"The acquisition is consistent with our long-standing view regarding the merits of rental industry consolidation - including within the top-10. Along with removing competition and boosting scale/enabling more product/service offerings, we believe a smaller number of better capitalised/more sophisticated operators should support increased discipline as the industry moves toward a stickier model with more consistent volumes and higher returns."
At 1520 BST, United Rentals shares were up 4.3% to $158.86.
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