WillScot Mobile Mini (WSC) to Acquire McGrath to Expand in NA
WillScot Mobile Mini Holdings Corp. WSC has inked a deal to acquire Livermore, CA-based leading business-to-business rental company — McGrath RentCorp MGRC — for $3.8 billion.
The acquisition will enhance WillScot Mobile Mini’s position as a North American leader in turnkey space solutions with a complementary geographic footprint and a more diversified platform, providing enhanced value across key customer segments.
With this buyout, McGrath shareholders will receive either $123.00 in cash or 2.8211 shares of WillScot Mobile Mini common stock for each MGRC share. As determined pursuant to the election and allocation procedures in the merger agreement, 60% of McGrath’s outstanding shares will be converted into cash and 40% will be converted into stock. The transaction values include approximately $800 million of net debt and the per-share consideration represents a premium of 10.1% to McGrath’s closing stock price on Jan 26, 2024.
The deal is expected to close in second-quarter 2024, subject to McGrath shareholders, regulatory approvals and other customary closing conditions.
The stock grew 1% on Jan 29 after the news release.
Buyout Rationales
On a pro forma basis, approximately 90% of combined total revenue is derived from leasing and related services, while the addition of Enviroplex expands WillScot Mobile Mini’s permanent modular capabilities. Post completion, a $50 million run-rate operating synergies is expected to be achieved within 24 months of closing.
Together, the companies will have a solid financial profile, with combined 2023 revenues of $3.2 billion and adjusted EBITDA of $1.4 billion, including run-rate operating synergies.
The combined customer base and rental fleet represent an expanded platform for the rollout of WSC’s Value-Added Products and Services, cross-selling and commercial best practices and operations excellence. The combined company is expected to capture additional revenue synergies and fleet efficiencies through its commercial and branch operations and by leveraging WSC’s best-in-class technology platform.
WillScot Mobile Mini expects to generate approximately $700 million of annual free cash flow by the end of the first full year post-closing, with further accretion to free cash flow margins in the future.
Acquisitions to Drive Growth
Over the past several years, WillScot Mobile Mini has been on an acquisition spree. It has a strong track record of business integrations that generate significant synergies. In October 2023, it acquired 616 Global Clearspans — a leading national temporary and semi-permanent clearspan structure company based in Tucson, AZ. The acquisition further extended WSC’s comprehensive offering of temporary space solutions, adding the capability to create more expansive space solutions in its core markets and providing growth opportunities in new end markets.
In August 2023, WSC acquired CA-based Cold Box and Ohio-based A&M Cold Storage. The buyouts added approximately 3,500 controlled climate containers, walk-in freezers and refrigerated storage trailers to WSC's fleet.
Shares of this Zacks Rank #3 (Hold) company have gained 15.7% compared with the Zacks Furniture industry’s 17.3% growth in the past three months. The company benefits from continuous product innovation and solid segmental performance.
About MGRC
McGrath, which also currently has a Zacks Rank #3, is a leading business-to-business rental company in North America with a strong record of profitable business growth. McGrath’s operations are centered on modular solutions through its Mobile Modular and Mobile Modular Portable Storage businesses. Also, its TRS-RenTelco business offers electronic test equipment rental solutions.
MGRC’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.7%. The Zacks Consensus Estimate for MGRC’s 2024 earnings suggests a rise of 10.8%, while the same for revenues suggests growth of 3% from the corresponding year-ago figures.
Key Picks
Some better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:
Virco Mfg. Corporation VIRC sports a Zacks Rank #1 (Strong Buy). VIRC has a trailing four-quarter earnings surprise of 188.6% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VIRC’s next year earnings per share and sales indicates a rise of 27.4% and 8.1%, respectively, from the year-ago period’s levels.
Leggett & Platt, Incorporated LEG currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 3.9% on average.
LEG’s earnings estimates for 2024 of $1.39 per share has moved up from $1.37 in the past 30 days, which indicate a 0.4% year-over-year decline.
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