United Rentals, Inc., Greenwich, Conn., announced yesterday that Cerberus Capital Management, L.P. informed it that Cerberus is not prepared to proceed with the purchase of United Rentals on the terms set forth in its merger agreement, dated July 22, 2007. According to United Rentals, Cerberus confirmed that there has not been a material adverse change at United Rentals.
United Rentals views this repudiation by Cerberus as unwarranted and incompatible with the covenants of the merger agreement. Having fulfilled all the closing conditions under the merger agreement, United Rentals is prepared to complete the transaction promptly.
Earlier today however, an affiliate of Cerberus Capital Management said it had offered to renegotiate the terms of its $4 billion deal to buy United Rentals or pay a $100 million breakup fee to walk away from the transaction. The Cerberus affiliate, RAM Holdings Inc., said the equipment-rental company had refused to meet or hold talks to revise the terms of the deal.
According to a Reuters press release, RAM said it "has been diligent in its efforts to consummate the transaction, but has encountered sustained volatility in the credit market, which has had a variety of adverse consequences." As the credit market tightened, the buyout group said it contacted United Rentals and its financial advisers in August and "asked to engage in a constructive dialogue to address concerns arising out of these developments." United Rentals disputed Cerberus's contention that changes in the credit market could jeopardize the terms of the deal.