26.01.2017

United takes NES

United Rentals has reached agreement to acquire competitor NES from Diamond Castle Holdings for $965 million in cash. The deal is expected to complete in April

Chicago based NES had revenues last year of around $369 million with a pre tax profit of around $20 million. The NES fleet is valued at around $900 million at replacement cost, and the company operates from 73 branches across 27 states, with a concentration in the eastern half of the United States. It employs around 1,100.

NES, which is led by IPAF president Andy Studdert, runs a fleet that is largely made up of aerial lifts, telehandlers and small pick & carry cranes - lifting equipment represents over 90 percent of the business, almost half of it from boom lifts and 15 percent scissor lifts - in dollar terms.
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The combined United/NES depot network - United is Blue NES Red

United chief executive Michael Kneeland said: “The NES agreement satisfies the rigorous strategic, financial and cultural standards we set for acquisitions. This exciting transaction will augment our revenue, earnings, EBITDA, free cash flow and overall scale, and expand our base of local and strategic accounts at a key point in the demand cycle.”

“In NES, we are acquiring a well-run operation that’s primed to benefit from our technology, infrastructure and cross-selling capabilities. Most importantly, we’re gaining a great team that shares our intense focus on safety and customer service. We’ll be working side by side throughout the integration to capitalize on best-in-class expertise from both sides. We look forward to welcoming the NES team to United Rentals.”

UPDATE
The deal was completed for $965 million in cash on April 3rd 2017n

Vertikal Comment

This deal came as a bit of surprise, United Rentals has seen its revenues flagging in 2016 as had NES, while some other larger competitors have continued to grow, however it has reported that the fourth quarter was stronger across the board and that it expects 2017 to improve. This deal will include a fair bit of overlap in terms of coverage but will add a good number of new customers and some decent equipment, not to mention some very good middle managers and specialist staff.

With the addition of NES United should easily exceed revenues of over $6 billion in 2017, although it has yet to forecast full year earnings for the combined company. NES is a quality company and should integrate well with United. While United will clearly benefit several strong competitors will also be looking to benefit from the move.