United Rentals Forecasts $230 Million in Synergies from RSC Acquisition

Rental Equipment Register (RER) reports that in a recent update to investors, United Rentals, Greenwich, Conn., said its target for cost synergies with recently acquired RSC Rental is $230 million, and that the company expects its rental rates to improve six percent in 2012.

United Rentals told investors that a field leadership team is in place and employee playbooks have distributed to ease the transition at the branch level. In addition, United Rentals says cross-company visibility of fleet has been provided at the branch level, enabling easy sharing of equipment. The company has also launched an employee microsite and held senior leadership meetings with branches throughout North America.

United officials said that 34 percent of the $230 million in synergies would come from branch consolidation, 26 percent would come from reduced corporate overhead, 10 percent from reduced regional field overhead, and 31 percent from other efficiencies. It expects to reach $70 million in cost savings in 2012, $200 million by 2013 and $230 million by 2014.

United Rentals CEO Michael Kneeland outlined upcoming milestones and key activities, including:

- Rental rate improvement through a rollout of CORE (Customer Oriented Rates Excellence) across the combined company; enhanced value proposition and service to customers; optimized rental agreements with largest customers;

- Realigning sales force territories to ensure maximum effectiveness;

- Consolidation of IT platforms by mid-June;

- Beginning branch consolidations in late June;

- Implementation of “best-of-both” business process—delivery, fleet process and repair and maintenance;

- Manage the capture of cost, revenue and capex synergies.

Recapping the first quarter, United Rentals posted $523 million in first-quarter rental revenue, while RSC posted $346 million, respective increases of 20.5 percent and 27.4 percent, with United Rentals realizing total revenue of $656 million (up 25.4 percent) and RSC $408 million (up 24.8 percent.)

In the month of April, United Rentals posted rental revenue of $188 million (a 19.2-percent year-over-year increase), while RSC grossed $120 million (up 19.6 percent). In total revenue, United Rentals had $231 million (up 23.2 percent) and RSC $139 million (up 19.5 percent).