H&E Equipment Services Inc. and Neff Corp. have entered into a definitive merger agreement, in which H&E will acquire equipment rental company Neff. Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, H&E will pay $21.07 in cash per share of Neff common stock, for a total enterprise value of approximately $1.2 billion, including approximately $690 million of net debt. The transaction is expected to close in the late third quarter or early fourth quarter of 2017.
“This agreement accelerates our stated strategy to expand our footprint across the United States, as we seek to penetrate and grow our business in strategic business segments,” John Engquist, H&E’s CEO, said in a company statement. “Further, this transaction will bring together what we believe to be two highly complementary businesses that share a commitment to addressing the increasingly complex equipment needs of our customers. Our broader geographic footprint and enhanced capabilities in strategic markets, coupled with complementary expertise across equipment categories, are expected to help us to achieve our growth goals.”
Positive Gains of the Acquisition
The equipment rental acquisition will nearly double the number of H&E branches, from 78 to 147, within H&E’s existing footprint in the strategically important Gulf Coast, Mid-Atlantic, Southeast and West Coast regions.
As of March 31, 2017, the companies’ combined fleet totaled $2.2 billion based on original equipment cost (OEC) and consisted of 43,749 units. The addition of Neff’s fleet will complement H&E’s concentration in aerial work platform equipment, and the combined company will possess one of the largest earthmoving rental fleets in the industry.
The transaction also is expected to increase H&E’s penetration in the non-residential construction market. With a significantly larger earthmoving fleet, we believe H&E will be well-positioned to gain from any future governmental infrastructure spending initiatives and will also have a broader exposure to new regional and local customers in the construction markets generally. H&E believes that the earthmoving segment is an under-penetrated segment that may afford enhanced growth opportunities
Transaction Highlight
- H&E estimates the acquisition of equipment rental company Neff Corp. will create $25 to $30 million of synergies annually related to corporate overhead, systems and operational efficiencies, as well as scale benefits for equipment purchases. The acquisition of Neff is expected to generate in excess of $800 million of gross tax assets for H&E arising from a step-up in the basis of certain of Neff’s assets.
- Wells Fargo Bank and affiliated entities have agreed to provide committed financing for the transaction, subject to customary conditions. The transaction is not subject to a financing condition.
- Private investment funds managed by Wayzata Investment Partners LLC holding approximately 62.7% of the outstanding common shares of Neff have executed a written consent to approve the transaction, thereby providing the required stockholder approval for the transaction.
- The merger agreement includes a “go-shop” period, which runs through August 20, 2017, during which the special committee of Neff’s board of directors, with the assistance of its financial and legal advisors, may solicit alternative proposals to acquire Neff. There can be no assurance that this process will result in receipt of a superior offer or that any other transactions will be approved or consummated.
