20.10.2005

Cramo and RK to merge

Rakentajain Konevuokraamo Oyj (RK) of Finland and Cramo AB of Sweden, have announced that they will merge at the end of this year.

The combined company will be among the five largest rental companies in Europe. And, according to RK will be the market leader in Finland, Sweden and Estonia and hold strong market positions in Norway, Denmark, the Netherlands, Latvia, Lithuania, Poland and Russia.

The new company plans to use this base to expand operations in the Eastern European and Russian markets. The combined net sales for the two companies n 2004 was €293 million with an EBITDA of approximately €78 million. The two businesses employ 1,634 people working from 252 depots in 10 countries.

The transaction is structured as an acquisition of Cramo by RK so the combined company will be listed on the Helsinki Stock Exchange. The Chief Executive will be Vesa Koivula, the present CEO of RK, while Göran Carlson, who took over as CEO of Cramo in September when Gunnar Gliffberg retired, will be Deputy CEO.

So far the four largest RK shareholders, representing 78 percent of the votes (37% of the equity) have approved the deal while all four Cramo shareholders have given their approval.

The deal is an all share offer, with RK doubling the number of B shares in circulation by issuing almost 15 million new shares to Cramo shareholders. At the same time it will eliminate its own A shares by converting them to B shares.

And finally Cramo’s largest single shareholder, Caterpillar, will sell all of its shares to Pon (the second largest Cramo shareholder) and Suomi Mutual (the second largest RK shareholder). The net result of all this is that RK shareholders will own 60 percent of the new Company, while Cramo shareholders will own 40 percent.

However… The largest single shareholder in the new company will be none other than PON, the Dutch company that recently bought back Gunco from Cramo. Pon also own Caterpillar distributors in Scandinavia and Holland.

The three remaining Cramo shareholders will in fact control 40 percent of the shares in the new business effectively giving them control as 30 percent of the RK shareholding is fragmented among individuals.

Pon will have the right to appoint three main board members while Suomi Mutual and Rakennusmestarien Saatio will appoint three between them. The chairman will be an independent Finn, currently Paavo Ruusuvuori .


"We are very pleased that the principal shareholders were able to reach an agreement after extended negotiations. By joining forces with Cramo, RK can now implement its growth strategy. RK being the most profitable company within the industry makes it possible to create a very competitive company, with a strong foundation to participate in the future consolidation of the equipment rental market, and to grow profitably", says Paavo Ruusuvuori, Chairman of the Board of RK.

"The combination with RK's operations opens up really exciting possibilities for us", says Cramo´s CEO Göran Carlson. "We become one of very few truly pan-European players, with the entire platform - operationally as well as financially - to benefit fully from the rapid growth in the rental industry".

A few facts:

The new business will have the following geographical profile:
Sweden 53%
Finland 27%
Norway 7%
Denmark 5%
Holland 4%

The new shares had a value at Tuesday’s closing price, of €132 million and a total enterprise value of€381 million.

Vertikal Comment

This deal, while being a close kept secret, has been on the cards for a while, Interestingly Cramo was out on the acquisition trail as recently as October 4th, when it announced the purchase of Tiddermans.

The merged company is expected to realise around €5 million of savings by 2007 and will continue to operate under exiting brand names, but will rationalise to use only one name in each market, one assumes the stronger of the two?

RK/Cramo is now aiming to become the third largest rental company in Europe after Hewden and Loxam. This means displacing both Speedy and Rami rent, no easy task. It looks as though a wave of consolidation might be on its way, Speedy and Rami are both growing rapidly, but of the top five, Hewden and Speedy, the two British contenders, currently limit their operations to the UK with little sign of this changing.

Who knows which companies will be in the top five in two year’s time?? Watch this space.