United Rentals sees H&E Equipment deal accretive to EPS in first year post-close

The purchase price of approximately $4.8B represents a multiple of 6.9x adjusted EBITDA for the trailing 12 months ended September 30, 2024, or 5.8x adjusted EBITDA including $130M of targeted cost synergies and the net present value of tax attributes estimated at approximately $54M. The combination is expected to generate approximately $130M of annualized cost synergies within 24 months of closing, primarily in the areas of corporate overhead and operations. Additionally, United Rentals (URI) expects to realize procurement savings of approximately 5% as compared to historical H&E (HEES) pricing. United Rentals expects to realize approximately $120M of annual revenue cross-sell synergies by year three, as legacy H&E customers take advantage of United Rentals’ specialty rental offerings. The acquisition 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 is expected to reach the company’s cost of capital by the end of year three on a run-rate basis, with compelling IRR and NPV across multiple macro scenarios. The transaction is projected to result in a pro forma net leverage ratio at closing of approximately 2.3x, well within the company’s target range of 1.5-2.5x. Upon closing, 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. Accordingly, the company has paused its share repurchase plan in anticipation of driving towards this goal. The integration of H&E into United Rentals’ operations presents opportunities to improve efficiency, productivity and new business development with the adoption of United Rentals’ operational excellence, including its technology offerings. The transaction is not conditioned on the availability of financing. United Rentals has obtained bridge commitments to ensure its ability to close the transaction as soon as possible, with the expectation that it will use a combination of newly issued debt and/or borrowings and existing capacity under its ABL facility to fund the transaction and related expenses at close. Notably, the transaction will not impact the company’s current dividend program.