Private equity group Cerberus will acquire United Rentals Inc. for about $4 billion in cash, the equipment rental company said Monday.
Including about $2.6 billion in assumed debt, the transaction is valued at $6.6 billion.
Shares of United Rentals, one of the largest players in the construction-gear rental industry, have risen more than 16 percent since April 9, the day before the company said it might put itself up for sale. United Rentals jumped another 67 cents, more than 2 percent, to $33.04, in midday trading Monday.
United Rentals has a network of more 690 rental locations in 48 states, 10 Canadian provinces and Mexico and more than 12,000 employees, according to the company’s web site, which serve construction and industrial customers, utilities, municipalities and private homeowners.
“Shareholders should be pleased,” Citi Investment Research analyst David Raso wrote in an investor report.
The $34.50-per-share purchase price represents a 7 percent premium over United’s closing price of $32.37 on Friday.
“It’s a good deal,” said James D. Ragan, an equity analyst with Crowell, Weedon & Co. in Los Angeles. “We were hopeful that the price would be a bit higher, so it’s bitter sweet.”
Weedon & Co. has no investment banking relationship with the company, Ragan said.
For the year ended Dec. 31, 2006, United Rentals posted profit of $224 million on revenue of $3.64 billion.
“Cerberus is a firm that shares our deep respect for operational excellence,” United’s Chief Executive Officer Michael J. Kneeland said in a statement. “They have an impressive track record of investing in industry leaders and working constructively with management teams to accelerate profitability and growth.”
United Rentals, whose board approved the transaction, said it can seek additional offers through Aug. 31. Holders of the company’s preferred stock, including affiliates of Apollo Management LP, which represent about 18 percent of the company’s voting power, have agreed to vote in favor of the deal.
“This story may not be done,” said Raso, adding that other private equity bidders, including some already in the rental industry, have expressed interest in United.
Cerberus Capital Management, L.P., based in New York, has approximately $25 billion under management in funds and accounts.
The acquisition is subject to United stockholder approval and regulatory review.
Bank of America, Credit Suisse, Morgan Stanley and Lehman Brothers have committed to provide debt financing.