STAMFORD, Conn. - United Rentals , Inc. (NYSE: NYSE:URI) has announced a definitive agreement to acquire Yak Access, LLC, Yak Mat, LLC, and New South Access & Environmental Solutions, LLC, collectively known as "Yak," from Platinum Equity for approximately $1.1 billion in cash. The transaction is slated to close in the first quarter of 2024, pending customary conditions.
Yak, a North American leader in the matting industry, boasts a fleet of around 600,000 mats used for surface protection in construction and maintenance operations. The company primarily serves the utility and midstream sectors, having generated $171 million in adjusted EBITDA from $353 million in adjusted revenue over the past year.
The acquisition is a strategic move for United Rentals to expand its Specialty business into a new and growing market segment. It is expected to provide immediate cross-selling opportunities and aligns with United Rentals' customer-first philosophy and focus on safety.
United Rentals plans to fund the transaction through new debt financing and existing capacity under its Asset-Based Lending (ABL) facility. The company anticipates realizing about $166 million in net present value of tax benefits included in the purchase price. Additionally, United Rentals expects to realize a $7 million benefit to adjusted EBITDA from cost synergies by the end of the second year post-closing.
Matthew Flannery, President and CEO of United Rentals, expressed confidence in the acquisition, noting the strategic, financial, and cultural fit of Yak with United Rentals and the potential for shareholder returns. He highlighted the importance of the new Matting Solutions business in the company's growth strategy, especially in the Power vertical.
Frank Bardonaro, CEO of Yak, commented on the benefits of the merger for Yak's customers and employees, emphasizing the complementary nature of their expertise with United Rentals' broader offerings.
The transaction is expected to be immediately accretive to United Rentals' earnings per share (EPS) and free cash flow (FCF), with a pro forma leverage ratio of approximately 1.7 times at closing. Additionally, the structure includes a potential for extra cash consideration based on revenue attainment in the first two years after closing, capped at $50 million.
United Rentals is the world's largest equipment rental company, with 1,504 rental locations across North America, Europe, Australia, and New Zealand, and a fleet valued at $20.66 billion. Yak operates in over 40 U.S. states, providing ground protection and temporary roadway solutions.
This announcement is based on a press release statement.
InvestingPro Insights
As United Rentals, Inc. (NYSE: URI) positions itself for growth through strategic acquisitions, investors are keenly observing the company's financial health and market performance. Real-time data from InvestingPro offers a snapshot of United Rentals' current standing in the market.
The company's market capitalization stands at a robust $47.07 billion, reflecting investor confidence in its business model and growth prospects. With a Price/Earnings (P/E) ratio of 19.75, United Rentals is trading at a valuation that suggests investors are expecting earnings growth. This is further supported by the forward-looking PEG Ratio of 1.02, indicating that the stock's price is in line with expected earnings growth rates.
InvestingPro Tips highlight that United Rentals is trading near its 52-week high, with a price that is 99.7% of this peak, signaling strong market performance. Moreover, 7 analysts have revised their earnings estimates upwards for the upcoming period, suggesting potential for continued financial strength. Additionally, the company has demonstrated a strong return over the last three months, with a 43.3% total price return, underpinning the positive momentum leading up to the acquisition announcement.
For investors looking to delve deeper into United Rentals' prospects and performance, there are additional InvestingPro Tips available, which could provide further insights into the company's financial nuances. To explore these insights and make more informed investment decisions, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
With United Rentals' next earnings date approaching on April 24, 2024, the market will be watching closely to see how the acquisition impacts the company's bottom line and whether the strategic expansion into the matting solutions business will translate into the anticipated shareholder returns.
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