United Rentals to Buy BakerCorp

United Rentals, Inc. and BakerCorp International Holdings, Inc. have entered into a definitive agreement for United Rentals to buy BakerCorp for approximately $715 million in cash.

The boards of directors of United Rentals and BakerCorp have unanimously approved the agreement. The transaction is expected to close in the third quarter of this year.

BakerCorp is a leading multinational provider of tank, pump, filtration, and trench-shoring rental solutions for a broad range of industrial and construction applications. The company has about 950 employees serving more than 4,800 customers in North America and Europe.

BakerCorp’s operations are concentrated in the United States and Canada, where it has 46 locations. Another 11 locations are spread across France, Germany, the UK and the Netherlands.

For the 12 months ended May 31, 2018, BakerCorp generated $79 million of adjusted EBITDA at a 26.9% margin on $295 million of total revenue.

Strong Strategic Rationale

BakerCorp’s 75-plus years in business have created strong customer relationships in the industrial and construction sectors. The combined company will serve more accounts with a broader fleet, including about 24,000 units to be acquired at closing. The combination is expected to create significant opportunities for revenue growth and customer service through cross-selling, re-rent conversion, and scale.
Combining BakerCorp’s solutions for fluid storage, transfer, and treatment with United Rentals’ Pump Solutions unit will offer strong solutions for customers in the fluid solutions business, with market-leading revenue of approximately $606 million.
The integration of BakerCorp into United Rentals will give the acquired locations access to United Rentals’ systems and technology, along with process and data-driven efficiencies. The combined operations are expected to create approximately $19 million in direct cost synergies across corporate overhead and shared services.
BakerCorp’s international operations -- about 15% of total revenue for the fiscal year ended January 31, 2018 -- provide entry into select European markets for the rental of fluid solutions.
United Rentals and BakerCorp share many cultural attributes, including exemplary safety records, highly engaged employees, deep industry expertise and a commitment to help customers succeed through cost-efficient, productive solutions.
United Rentals will acquire BakerCorp for a purchase price of approximately $715 million in cash. This represents a multiple of 9.0x adjusted EBITDA for the trailing 12-month period ended May 31, 2018, and an adjusted purchase multiple of 6.6x, including tax benefits and cost synergies.
The acquisition is expected to be accretive to adjusted earnings per share with an attractive internal rate of return and run-rate ROIC exceeding cost of capital within 36 months after closing. The company expects its net leverage ratio to be approximately 2.5x at year-end 2018 and remains committed to executing its recently announced $1.25 billion share repurchase authorization.
The transaction is not conditioned on financing. United Rentals expects to use a combination of cash and existing capacity under its ABL facility to fund the transaction and related expenses.

CEO Comments
Michael Kneeland, chief executive officer of United Rentals, said, “We’re very pleased to announce an agreement to acquire BakerCorp, an expert in fluid solutions and a highly regarded, customer-focused operation. We’re gaining a terrific team that shares our strong commitment to safety and customer service, and operations that complement our North American pump and trench offerings. This transaction will also be our company’s first experience in Europe, where BakerCorp has established an attractive, fast-growing business with significant future opportunity.”

Kneeland continued, “We set a high bar across strategic, financial and cultural metrics when evaluating any acquisition. BakerCorp met every test, with the additional advantage of being primed to benefit from our systems and technology. We expect the combination to augment our revenue, earnings and EBITDA in 2018, while propelling the growth of one of our most promising specialty segments.”

Bob Craycraft, president and chief executive officer of BakerCorp, said, “I’m extremely proud of what our team has built. The value we’ve delivered for our customers has created this new opportunity to be part of the largest equipment rental company in the world. The combination with United Rentals is an exciting development for the future of both our customers and employees.”