10.09.2018

United to acquire BlueLine

United Rentals has announced that it has agreed a deal to buy BlueLine Rental for $2.1 billion in cash from private equity firm Platinum Equity.

United expects to fund the deal with newly issued debt and bank borrowing. Blueline, previously Volvo Rents, operates from 114 locations across 25 states, Canada and Puerto Rico, with annual revenues of $786 million and 1,700 employees. The company has a fleet of around 46,000 units with an original cost of almost than $1.5 billion. United says that it anticipates around $45 million of synergy related cost savings and that it can shave $15 million from BlueLine’s procurement costs.

Assuming regulatory and shareholder approvals cause no delay to the deal - which will come in the form of a merger with BlueLine's holding company parent - it will complete in the fourth quarter, with United’s revenues for 2019 likely to easily exceed $8 billion. Platinum Equity acquired Volvo Rents at the end of 2013, See Volvo Rents is now BlueLine and has made a number of strategic bolt on acquisitions over the years.

United’s chief executive Michael Kneeland said: “The acquisition of BlueLine meets all of our criteria for long term, profitable growth at attractive returns. We are executing our strategy of ‘growing the core’ in a strong demand environment to drive superior value for our customers and shareholders. Our company will be going to market with more talent, capacity and customer diversification than ever before.”

“There are some distinct advantages to the BlueLine integration, such as our common technology systems and strong safety cultures. BlueLine has a fleet mix that complements our own, and a well-diversified base of mid-sized and local customers, many of whom can use our specialty solutions. We expect to complete the acquisition in the fourth quarter, setting the stage for an exciting 2019. I look forward to welcoming our new colleagues very soon.”

Louis Samson, partner at Platinum Equity, added: “BlueLine has evolved into a strong industry leader and is in perfect position to take the next step as part of United Rentals. Following the initial carve out from Volvo four years ago, we deployed the full range of Platinum’s mergers, acquisitions and operational tool kit to completely transform the business. Substantial investments in systems, add-on acquisitions and other growth initiatives drove improvements in top line and earnings performance. It is a natural fit with United Rentals, and both companies will benefit from the combination.”

Vertikal Comment

Just when you think that there cannot be any more multi-billion dollar deals left for United it defies the odds and makes another. It is hard to see that the BlueLine deal makes that much strategic sense in terms of adding anything to United. It does of course add fleet volume and fully established outlets, and as the company says it is likely that this will provide increased coverage in a number of metropolitan areas taking it closer to the customer.

However, one cannot help but think that United is now simply back in the consolidation game, soaking up competitors and buying in revenue growth. It would be easy to compare this with the failed sprees of companies like BET in the 1980s, however United has more than proven itself at successfully integrating and digesting big acquisitions. Last year it managed two - NES and NEFF for $960 million and $1.3 billion respectively.

Barely eight weeks ago it purchased BakerCorp International Holdings for $715 million in cash. At this pace the company is likely to hit $10 billion in revenues by 2020 - a mind boggling size for what is effectively a regional equipment rental company.

Ordinarily I would expect a company following this trend to become way too big to manage, leading it to crash and burn – either spectacularly or over a period. However United has proven time and time again that it can manage the growth very effectively. And the end of the day these big deals are a great deal simpler than when it started out in the business and was acquiring several small companies each week!

Interesting times.