03.12.2015

Speedy HSS merger talks off

UK general rental giants Speedy and HSS have it seems been holding discussions regarding a possible merger - but a board room disagreement has brought an abrupt end to them - at least for now.

The news broke this morning when it is said that non-executive directors Chris Masters and James Morely resigned over the issue. There has also been some discussion concerning a possible bid to oust Speedy chairman Jan Astrand, by one or both of the departing directors.

Whether the two departures will lead to a renewal of merger talks remains to be seen, the fact that HSS shares rallied today as news leaked out might be an indicator of what the market thinks?

Speedy also announced the appointment this morning of Chris Morgan as interim chief financial officer. After not commenting on Speedy has denied merger talks and seemingly dismissed any possibility of a tie up with HSS.

Vertikal Comment

This is something of a surprise, both Speedy and HSS have issued profit warnings this year and had a change of chief executive. Both have struggled in the first half, posting pre-tax losses, while others have maintained solid results. This aside the two companies have very different issues. But both are at the early stages of putting new plans in place that ought to see them recover during 2016.

A merged company would have combined annual revenues in the region of £600 million making it one of the largest rental companies in Europe. However the two have a great deal of overlap in terms of network and product offerings and in all likelihood the merger – assuming that this is what would happen – would be messy, time consuming and most likely result in a combined business with significantly lower revenues than the two have separately.

The two are vulnerable to a third party acquisition given that combined market capitalisation is in the region of £250 million or so. Most reports today suggest that a number of major shareholders at each company were in favour of the merger. Whether the majority of shareholders feel that this is the best strategy for the future remains to be seen.

Interesting times – watch this space and watch the shares of key rivals such as Ashtead and Vp etc…