Acquisition will provide a new and growing
adjacency to United Rentals’ Specialty business with compelling
strategic and financial rationale
United Rentals, Inc. (NYSE: URI) (“United Rentals” or “the
company”) today announced that it has entered into a definitive
agreement to acquire Yak Access, LLC, Yak Mat, LLC and New South
Access & Environmental Solutions, LLC (collectively, “Yak”)
from Platinum Equity (“Platinum”) for approximately $1.1 billion in
cash. The transaction is expected to close in the first quarter of
2024, subject to limited contractual conditions.
Yak is a leader in the North American matting industry with a
fleet of approximately 600,000 hardwood, softwood, and composite
mats providing surface protection across both construction and
maintenance, repair and operations (MRO) applications. Yak
predominantly serves customers in the utility and midstream
verticals. For the year ended December 31, 2023, Yak generated $171
million of adjusted EBITDA on $353 million of adjusted revenue
across over 40 U.S. states.
United Rentals expects to use a combination of new debt
financing and existing capacity under its ABL facility to fund the
transaction and related expenses.
Strong Strategic Rationale
- Yak creates a new adjacency for United Rentals’ Specialty
business with scale in a large and growing segment. This
combination will further the company’s ability to deliver value as
a one-stop-shop for customers.
- Yak provides immediate cross-sell opportunities to both
existing and new customers across construction and MRO
applications.
- Yak shares many cultural similarities with United Rentals,
including a customer-first business philosophy, long-term customer
relationships and a strong focus on safety.
Robust Financial Drivers
- United Rentals sees significant potential to grow the matting
business over the next several years, supported by attractive
secular opportunities across both the energy and power markets,
funded by public and private investments.
- The company expects to realize approximately $166 million in
net present value of tax benefits included in the $1.1 billion
purchase price.
- The company expects to realize a $7 million benefit to adjusted
EBITDA, equivalent to approximately 2% of Yak’s adjusted revenue
for 2023, by the end of year two after closing from cost synergies
via operational efficiencies and overhead savings.
- The purchase price represents a multiple of 6.4 times adjusted
EBITDA for 2023, and an adjusted purchase multiple of 5.2 times,
net of tax benefits and cost synergies.
- The company expects the acquisition to be immediately accretive
to earnings per share (EPS) and free cash flow (FCF) with an
attractive return profile.
- The company expects a pro forma leverage ratio of approximately
1.7 times at closing, taking into account the expected debt
financing to fund the acquisition and Yak’s adjusted EBITDA. This
is within the company’s target range of 1.5-2.5 times.
- The transaction structure also provides for the potential for
additional cash consideration to be paid to the seller, with a
maximum payout of $50 million based on revenue attainment in the
first two years after closing.
CEO Comments
Matthew Flannery, president and chief executive officer of
United Rentals, said, “Our acquisition of Yak further diversifies
and differentiates United Rentals’ Specialty business offerings
while also driving shareholder returns. This newly created “Matting
Solutions” business will create another adjacency for our company
with scale in a large and growing market segment. In addition to
its attractive profile across growth, margins and returns, this
combination builds upon our Power vertical strategy, where
significant investment in generation, transmission and distribution
is expected over the next several decades.”
Flannery continued, “Yak meets the strategic, financial and
cultural criteria we aim for in acquisitions. We expect this new
line of business to augment our Specialty offerings as we continue
to execute on our strategy of further differentiating ourselves by
providing one-stop shop capabilities for our customers. We look
forward to welcoming our new team members to the United Rentals
family.”
Frank Bardonaro, CEO of Yak, said, “Yak is excited to accelerate
its business potential as part of United Rentals. This combination
will benefit both our customers and existing employees as our
established expertise in access solutions complements the broader
value proposition United Rentals offers. I’m proud of the leading
company we built and am happy we found a great partner for the next
chapter.”
Jacob Kotzubei, co-president of Platinum Equity and Matthew
Louie, Managing Director, Platinum Equity, said in a joint
statement: “Over the past six years we worked with the Yak team to
transform the business and are proud that it is now a stronger and
more resilient company ready for the next chapter. United Rentals
is an outstanding partner and a great long-term fit for Yak going
forward.”
Key Acquisition and Transaction Statistics
Financial information in $ millions
Base Purchase Price
$
1,100
Present Value of Acquired Tax Assets
$
166
Adjusted Revenue for Yak (calendar year
2023)
$
353
Adjusted EBITDA for Yak (calendar year
2023)
$
171
Estimated Annualized Cost Synergies
Achieved by End of Year Two
$
7
Number of Rental Units (i.e. mats)
~600,000
Revenue Generating States
More than 40
Note Regarding Yak Financial Information and Non-GAAP
Measures
Adjusted revenue and adjusted net income presented herein for
Yak represent only the historical results of the entities to be
acquired by United Rentals. See below for a summary of the
adjustments made to calculate adjusted revenue and adjusted net
income.
Yak’s EBITDA and adjusted EBITDA are non-GAAP financial measures
as defined under the rules of the Securities and Exchange
Commission. The company believes that these non-GAAP financial
measures provide useful information about the proposed transaction;
however, they should not be considered alternatives to GAAP net
income as indicators of operating performance. The table below (in
millions) provides a reconciliation between adjusted net income and
EBITDA and adjusted EBITDA. EBITDA represents the sum of adjusted
net income, depreciation and amortization, and interest expense,
net (income tax expense rounded to less than $1 million and is
excluded from the reconciliation). Adjusted EBITDA represents
EBITDA plus the adjustments detailed below.
Year ended
December 31,
2023
Adjusted net income (1)
$
54
Depreciation and amortization
144
Interest expense, net
66
EBITDA
$
264
One-time charges recorded in connection
with refinancing transactions, including gain on
extinguishment of debt, net of refinancing
transaction expenses
(101)
Other adjustments (2)
8
Adjusted EBITDA
$
171
1. Includes an estimate of revenue and net freight profit from
mat rentals to a commonly controlled entity that were eliminated in
consolidation by Yak that United Rentals expects to recognize
prospectively because the commonly controlled entity has agreed to
continue to rent the mats. Expenses related to such mat rentals are
included in Yak’s historical results. The revenue estimate for mat
rentals is based on historical mat rentals, adjusted for an
assumption of safety stock, and is calculated using assumed pricing
that is similar to the pricing expected following the
acquisition.
2. Other adjustments include certain costs that do not relate to
the post-transaction entity, including certain freights costs to
move equipment from closed markets in excess of normal operating
movement and prior sponsor costs.
Advisor
Sullivan & Cromwell LLP acted as United Rentals’ legal
advisor in the transaction.
About United Rentals
United Rentals, Inc. is the largest equipment rental company in
the world. The company has an integrated network of 1,504 rental
locations in North America, 38 in Europe, 23 in Australia and 19 in
New Zealand. In North America, the company operates in 49 states
and every Canadian province. The company’s approximately 26,300
employees serve construction and industrial customers, utilities,
municipalities, homeowners and others. The company offers
approximately 4,800 classes of equipment for rent with a total
original cost of $20.66 billion. United Rentals is a member of the
Standard & Poor’s 500 Index, the Barron’s 400 Index and the
Russell 3000 Index® and is headquartered in Stamford, Conn.
Additional information about United Rentals is available at
unitedrentals.com.
About Yak
Yak is one of the largest matting providers of ground protection
and temporary roadway solutions in the United States. The company
has an integrated network of more than 135 distribution points and
operates in over 40 states. The company primarily serves powerline
and pipeline customers, industrials, renewables, and other
infrastructure related industries. The company offers a full suite
of solutions, including ~600,000 hardwood, softwood, and composite
mats, temporary and permanent access roads, site evaluation, design
and installation of access plans, and mat removal and logistics
services. Yak is headquartered in Hattiesburg, Mississippi.
Cautionary Statement Regarding Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and the Private Securities Litigation Reform Act of
1995, known as the PSLRA. Forward-looking statements involve
significant risks and uncertainties that may cause actual results
to differ materially from those set forth in the statements. These
statements are based on current plans, estimates and projections,
and, therefore, you should not place undue reliance on them. No
forward-looking statement, including any such statement concerning
the completion and anticipated benefits of the proposed
transaction, can be guaranteed, and actual results may differ
materially from those projected. United Rentals undertakes no
obligation to publicly update any forward-looking statement,
whether as a result of new information, future events or otherwise.
Forward-looking statements are not historical facts, but rather are
based on current expectations, estimates, assumptions and
projections about the business and future financial results of the
equipment rental industry, and other legal, regulatory and economic
developments. We use words such as “anticipates,” “believes,”
“plans,” “expects,” “projects,” “future,” “intends,” “may,” “will,”
“should,” “could,” “estimates,” “predicts,” “potential,”
“continue,” “guidance” and similar expressions to identify these
forward-looking statements that are intended to be covered by the
safe harbor provisions of the PSLRA. Actual results could differ
materially from the results contemplated by these forward-looking
statements due to a number of factors, including, but not limited
to, those described in the SEC reports filed by United Rentals, as
well as (1) the length of time necessary to consummate the proposed
transaction may be longer than anticipated; (2) problems that may
arise in successfully integrating the businesses of United Rentals
and Yak, including, without limitation, problems associated with
the potential loss of any key employees of Yak; (3) the proposed
transaction may involve unexpected costs, including, without
limitation, the exposure to any unrecorded liabilities or
unidentified issues that we failed to discover during the due
diligence investigation of Yak or that are not covered by
insurance, as well as potential unfavorable accounting treatment
and unexpected increases in taxes; (4) our business may suffer as a
result of uncertainty surrounding the proposed transaction, any
adverse effects on our ability to maintain relationships with
customers, employees and suppliers, or the inherent risk associated
with entering a geographic area or line of business in which we
have no or limited experience; (5) we may not achieve the benefits
we expect from the transaction, including with respect to revenue,
earnings and free cash flow, the matting business and the
industries we are targeting may not experience the growth or levels
of investment we expect, we may not be able to realize expected tax
benefits, and we may not be able to achieve anticipated synergies;
and (6) the industry may be subject to future risks that are
described in the “Risk Factors” sections of the Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and other documents filed
from time to time with the SEC by United Rentals. United Rentals
gives no assurance that it will achieve its expectations and does
not assume any responsibility for the accuracy and completeness of
the forward-looking statements.
The foregoing list of factors is not exhaustive. You should
carefully consider the foregoing factors and the other risks and
uncertainties that affect the businesses of United Rentals
described in the “Risk Factors” sections of the Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and other documents filed
from time to time with the SEC. All forward-looking statements
included in this document are based upon information available to
United Rentals on the date hereof; and United Rentals assumes no
obligations to update or revise any such forward-looking
statements, whether as a result of new information, future events
or otherwise, except as may be required by applicable securities
laws. This communication is not intended to be a recommendation to
buy, sell or hold securities and does not constitute an offer for
the sale of, or the solicitation of an offer to buy securities in
any jurisdiction, including the United States. Any such offer will
only be made by means of a prospectus or offering memorandum, and
in compliance with applicable securities laws.
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Elizabeth Grenfell Vice President, Investor Relations O: (203)
618-7125 investors@ur.com
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