19.07.2006

Ashtead bid for Nations Rent

The Ashtead Group, owner of A-Plant in the UK and Sunbelt in North America, is in detailed discussions to buy NationsRent in the USA.

Ashtead's bid includes $600 million in cash and the assumption of approximately $400 million of debt, plus costs of approximately $50 million in relation to the early redemption of the Nations Rent Loan Notes offset by available tax losses.

A further future payment of up to $89 million, is contingent upon Ashtead’s share price performance

The deal would take Ashtead from being the world’s fourth largest rental company to at least the third largest.

The purchase would require substantial funding. The company is to raise £150 million through a three for eight fully underwritten rights issue, and the balance with new debt.

A new $1,600 million senior secured credit facility, $550 million of new senior loan notes and by utilizing Nation Rents current cash resources.

Ashtead believes that the deal would be “revenue enhancing” by 2008.

A Nations Rent acquisition would add 267 locations to Ashtead’s North American coverage, Ashtead says that the geographic breakdown will allow it to increase its “regional clusters” from 22 and 36.

Nations Rent had revenues of $716 million with EBITDA of $200
million last year. Ashtead believes that it can make savings of around $20 million by merging the two businesses and hopes to make further gains by raising Nations utilisation levels to that of Sunbelt.

Nations Rent has a rental fleet worth a $1 billion dollars at initial purchase prices, $665 million of which has been purchased since 2003.


George Burnett, chief executive of Ashtead, said: “Nations Rent is a high quality company which, like Sunbelt, has an attractive and significant exposure to the growing non-residential construction market in the US.

The merger of Nations Rent with Sunbelt creates a chain of 477 outlets with minimal overlap and accelerates our 'clustering' strategy that has delivered consistent profitable growth over the past few years.

Nations Rent and Sunbelt have similar rental fleets both in age and in mix and through the combination of these businesses we believe we will enjoy benefits of scale in both customer service and buying power.

The Acquisition represents the latest step in Ashtead's development and provides the Company with an excellent opportunity to create additional shareholder value.”

The deal will be put to Ashtead shareholders for approval at and EGM on August 4th, assuming it is approved the deal could close as soon as the end of August.

Vertikal Comment

Ashtead has only recent emerged from being a highly leveraged business that almost saw the company fail under its debt burden in 2003, a year in which it also experienced an accounting crisis in its US business. Earlier this month the company reported record profits on significantly improved revenues.

It also announced the retirement of George Burnett, who was instrumental in the company’s survival in 2003.

The market does not appear to have welcomed his retirement or this potential acquisition with open arms. Shares have slipped back on both announcements in spite of the record earnings and some positive buy recommendations in the UK Sunday papers.

The deal tilts Ashtead’s business further in the direction of North America, dwarfing its A-Plant operation in the UK.