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United Rentals (URI) Set to Acquire General Finance for $996M

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Zacks Equity Research
·3 min read
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United Rentals, Inc. URI recently reached an agreement to acquire General Finance Corporation GFN. Per the deal, United Rentals will pay $19 per share in cash to General Finance. The total enterprise value stands at nearly $996 million, which includes the assumption of $400 million of net debt.

Deal Rationale

General Finance, which is a major provider of mobile storage as well as modular office space, operates as Pac-Van and Container King in the United States and Canada, and as Royal Wolf in Australia and New Zealand. The company has more than 106 branches and more than 900 employees. It provides services to wide range of markets like construction, commercial, industrial, retail, transportation, petrochemical, consumer, natural resources, governmental and education.

General Finance, which is a leader in the North American sector for mobile storage and office solutions, will strengthen United Rentals’ position further in general construction and industrial rentals and specialty rentals.

Notably, General Finance will provide cross selling opportunities to United Rentals as it operates in 52 of the top 100 MSAs in North America, which is served by United Rentals locations. As of Dec 31, 2020, on a trailing 12-month basis, General Finance generated revenues of $346 million and adjusted EBITDA of $94 million.

United Rentals profitability will increase significantly over the next few years driven by synergies, complementary services, efficiencies of scale and an aggressive growth strategy. The company anticipates to generate a benefit of $17 million on the back of cost synergies to adjusted EBITDA by the end of year two.

Moreover, return on invested capital is likely to surpass the cost of capital within 18 months of completion of transaction on a run-rate basis.

President and CEO of United Rentals, Matthew Flannery, said, " We’re confident the time is right to reengage in M&A with this highly strategic combination, as our end markets recover from the challenges of 2020. General Finance is a customer-focused organization with excellent field operators and specialized expertise that complements our own.”

Shares of United Rentals have gained 40.3% year to date, compared with the Zacks Building Products – Miscellaneous industry’s rally of 16.1%.

Summing Up

United Rentals is expanding geographic borders and its product portfolio through acquisitions and joint ventures. As the largest equipment rental company in the world, United Rentals enjoys a strong brand recognition, which enables it to draw customers and build customer loyalty. The company offers approximately 4,000 classes of rental equipment for rent on an hourly, daily, weekly or monthly basis. We believe United Rentals will benefit from General Finance expertise in different markets.

Zacks Rank & Other Key Picks

United Rentals currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the same industry include Owens Corning Inc. OC and TopBuild Corp. BLD, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Owens Corning and TopBuild are expected to witness 25.9% and 33.2% earnings growth in 2021, respectively.

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Zacks Investment Research