04.12.2020

Nesco to acquire Custom Truck One Source

US based utility work platform/bucket truck, digger derrick and boomthe truck sales and rental company Nesco is to acquire Custom Truck One Source, one of its main competitors. The deal will be supported by Platinum Equity, which has committed to invest more than $850 million in deal and will hold a 57 percent majority stake in the combined company.

Nesco’s current investors, Energy Capital Partners and Capitol Investment, will retain their stakes in the merged business, while each will also contribute a further $100 million each. Custom Truck’s majority owner Blackstone, will also retain its stake in the business and invest a further $100 million.

Nesco will pay $1.475 billion for Custom Truck One Source, with the deal structured as a merger between the two companies, with the aim to create a leading, ‘one stop shop’ to supply speciality rental equipment to the transmission and distribution market. The combined company will have around 1,800 employees based across 46 locations with a rental fleet of almost 9,000 units – worth more than $1.3 billion. It will also have more than 400 service technicians and 120 mobile service engineers.

Custom Truck’s chief executive, Fred Ross, will become the chief executive of the merged business with the headquarters at Custom’s base in Kansas City, with a significant operation maintained in Bluffton, Indiana, where Nesco is based. Until the deal has been completed, Custom Truck One Source and Nesco will continue to operate as separate companies.

Nesco has grown rapidly since 2007, after it was acquired by HKW Capital Partners followed by the acquisition of the Terex Utilities Western rental fleet in 2010 See Terex Utilities sells fleet. It was then taken over by Platinum Equity in 2011 See: Platinum acquires Nesco which sold its majority stake to Energy Capital Partners in 2014. See Platinum sells Nesco More recently Nesco has been on the acquisition trail acquiring N&L Line Equipment in 2018 and Truck Utilities last year.

Custom Truck One Source has also been active and acquired the Terex North American boom truck and truck crane assets last year, See: Terex sells US crane assets

Nesco chief executive Lee Jacobson said: "This combination will create new opportunities for our company, our employees and the customers we serve. Nesco and Custom Truck are a perfect fit and together will be well positioned to pursue numerous opportunities in the rapidly growing speciality rental segment. We couldn't have reached this milestone without the hard work of our team, and we look forward to working together to ensure a seamless transition."

Custom Truck’s Fred Ross added: “By bringing together our companies, we will be able to offer you an even better suite of solutions across the speciality rental equipment value chain, including equipment rental, new sales, used sales, aftermarket parts and service, and retail parts, tools and accessories. What’s more, this combination will create a unique business model that should drive a better customer experience and a significant increase in the number and breadth of rental assets available. We are confident the new company will be better positioned to serve our customers.”

Mark Ein of Capitol said: "Since Capitol's investment in Nesco last year, our number one strategic priority has been to find a way to bring these two companies together, given the significant value inherent in the combination. With enhanced scale, a broader set of capabilities and vastly improved financial flexibility, we believe the new company will be distinctively well-positioned to take advantage of the anticipated growth in critical U.S. infrastructure efforts in energy, telecom and rail over the near term and beyond. We are very pleased to partner with Platinum, given its deep knowledge and strong track record in the equipment rental industry, as well as the existing CTOS shareholders led by Blackstone. Together with Platinum and our other co-investors and the combined company's Board and management team, we look forward to capturing the meaningful upside opportunities that lie ahead."

UPDATE
The deal was completed at the end of March, with the company making the following announcement:

"In connection with the acquisition, the merged company has changed its name to Custom Truck One Source, Inc. Its shares of common stock will trade on the NYSE under the ticker symbol 'CTOS' beginning on April 5th, 2021. The company’s leadership team will include Fred Ross as chief executive, Ryan McMonagle as chief operating officer and Brad Meader as chief financial officer, all of whom previously held those positions at CTOS."

“We are truly excited about bringing these two great companies together,” said Ross. “We believe that our stockholders will realise the benefits of the combination as we create one of the largest speciality rental fleets in the country. Moreover, we are excited to bring a larger platform to our customers and to continue to provide them with the outstanding customer service they have come to expect from both of us.”

In connection with the acquisition, Platinum has made an investment and became the majority stockholder of the company, while existing CTOS equity holders, including certain funds managed by the Blackstone group, the majority owner of CTOS prior to the acquisition, and certain members of the CTOS management team, became minority stockholders of the company. Energy Capital Partners and Capitol Investment, who together owned approximately 70 percent of Nesco’s outstanding common stock prior to the acquisition, retained their entire ownership positions in the company.

“We look forward to working with the management team to bring these companies together and to putting our playbook in action to create significant shareholder value for many years to come,” said Platinum Equity's Louis Samson. “We have a lot of experience in this industry and are excited about the opportunities
ahead.”

“We are thrilled to consummate this merger which creates a very unique, valuable, well capitalised company that is a terrific business and now also will benefit from, and play an important role in, the likely large investment, about to be made in our nation’s electrical, telecom and rail infrastructure,” said Mark Ein, capitol’s CEO and Nesco’s vice chairman who will join the CTOS board."