United Rentals to Acquire RSC Holdings

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The new United Rentals is well-positioned to benefit from increasing rental penetration, continuing strength of the industrial sector, increasing service to customers across a variety of industries, and recovering construction activity. United Rentals and RSC have already begun working on a plan to facilitate a smooth integration of the businesses and realization of over $200 million of potential cost savings.

Michael Kneeland, president and chief executive officer of United Rentals was excited about the future. 

"This transaction marks a transformative moment in our company’s history," Kneeland said. "Combining the experience and resources of two top performing equipment rental companies creates an exceptional company. "

RSC Chief Executive Officer and President Erik Olsson is also optimistic.

"RSC has a strong track record of profitable growth," Olsson said. "And we are proud of what we have built. At the same time, I am confident that by partnering with United Rentals we can accomplish far more than either company could have achieved on its own, including significant synergies."

Upon the close of the transaction, three of RSC’s independent directors will receive seats on United Rentals’ existing Board of Directors.

Kneeland and Jenne Britell, United Rentals’ chairman, will remain in their positions at the combined company.

Transaction Highlights

Upon the closing of the transaction, each outstanding share of RSC common stock will be converted into the stockholder having the right to receive $10.80 in cash and 0.2783 of a share of United Rentals common stock, subject to the terms and conditions of the merger agreement.

The transaction provides immediate value to RSC stockholders through the cash component, as well as continued participation in future value creation of United Rentals through their ownership of approximately 30 percent of United Rentals on a fully diluted basis. The price of $18 per share represents a 58 percent premium over RSC’s closing price as of Dec.15.

The cash portion of the transaction will be financed through new debt issuance and drawing on current loan facilities. United Rentals has obtained financing commitments from Morgan Stanley Senior Funding Inc., Bank of America Merrill Lynch and Wells Fargo in support of this transaction.

By the end of 2012, the combined company’s leverage ratio is expected to be in line with United Rentals’ previously stated target range of 3.5x – 4.5x. As a result, United Rentals expects to retain its current corporate credit ratings. United Rentals intends to repay the outstanding amounts on RSC’s existing Senior Secured Credit Facilities and Senior Secured Notes due in 2017 and assume all of RSC’s existing unsecured debt.

United Rentals’ Board also announced its intention to authorize after closing a stock buyback of up to $200 million of the company’s common stock. United Rentals’ current intention is to complete the stock buyback within six to 12 months after closing.

The deal is expected to be accretive to United Rentals’ cash earnings per share in the first full year after closing. The transaction is anticipated to provide over $200 million of annual cost savings through the elimination of redundant infrastructure, branches and overhead, two thirds of which is expected to be achievable within the first 12 months after the transaction. The combination is also expected to provide meaningful revenue synergies from the expanded footprint, in particular with national and industrial account relationships and provide additional cash flow upside through optimization of the combined fleet and capital expenditures.

The proposed transaction is subject to the conditions of delivery of tax opinions and a solvency opinion, as well as customary closing conditions, including approval by United Rentals and RSC stockholders, absence of a United Rentals and RSC material adverse effect, and notification and clearance under certain antitrust statutes. United Rentals and RSC expect the transaction to close in the first half of 2012.

Oak Hill Capital Partners has agreed to vote its 33.5 percent shareholding in RSC in favor of the transaction.

Special meetings of the United Rentals’ and RSC’s respective stockholders will be held as soon as practicable after the preparation and mailing of the joint proxy statement/prospectus to be included in the registration statement on Form S-4 to be filed by United Rentals to register the shares of United Rentals common stock issuable in connection with the proposed transaction with the Securities and Exchange Commission and the subsequent mailing to United Rentals’ and RSC’s respective stockholders. The joint proxy statement/prospectus is expected to be mailed as promptly as practicable after the effectiveness of this registration statement.

Centerview Partners and Morgan Stanley & Co., LLC acted as financial advisors to United Rentals, and Sullivan & Cromwell LLP acted as the company's legal advisor. Barclays Capital and Goldman, Sachs & Co., were lead financial advisors to RSC, and Deutsche Bank also provided financial advice. Paul, Weiss, Rifkind, Wharton & Garrison LLP and Debevoise & Plimpton LLP acted as RSC’s legal advisors.