LONDON, UK / ACCESSWIRE / July 18, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for H&E Equipment Services, Inc. (NASDAQ: HEES) (“H&E”), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=HEES. The Company announced on July 14, 2017, that it has entered into a definitive merger agreement with Neff Corp. (NYSE: NEFF) under which H&E will acquire Neff to create a leading Equipment Rental Company. For immediate access to our complimentary reports, including today’s coverage, register for free now at:
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Total consideration of $1.2 billion
As a part of the agreement, H&E has committed to pay $21.07 in cash per share of Neff’s common stock, i.e. a total enterprise value of around $1.2 billion, which includes about $690 million of net debt. However, the per-share consideration payable to Neff’s stockholders is subject to certain downward adjustments. It is not to exceed $0.44 per share, in case H&E incurs certain increased financing costs due to the transaction not being concluded on or prior to January 14, 2018.
The Board of Directors of both the companies has already approved the agreement. However, the transaction is still subject to customary closing conditions including Hart-Scott-Rodino Act clearance and it is anticipated to close in the late third quarter or early fourth quarter of 2017.
Deal to Enable H&E to Achieve its Long Term Growth Objectives
John Engquist, H&E’s Chief Executive Officer announced that the deal with Neff would enable H&E to expand its footprint across the United States and grow its business in strategic business segments. This deal brings together two complementary businesses with the common goal of addressing increasingly complex equipment needs of customers. He believed that H&E’s vast geographic footprint and superior capabilities in strategic markets coupled with Neff’s expertise across equipment categories would boost growth. He was positive about the deal and welcomed Neff’s talented employee base to the H&E family.
The strategic rationale behind the deal can be categorized into following four points:
- Economies of scale: As a result of the deal, the number of H&E branches is expected to increase from 78 to 147 in its strategically important regions i.e. Gulf Coast, Mid-Atlantic, Southeast, and West Coast regions. This will lead to best-in-class practices and a wide range of equipment in more locations, which would eventually benefit both H&E’s and Neff’s customers.
- Improvement in fleet utilization: Addition of Neff’s fleet will compliment H&E’s concentration in aerial work platform equipment. The combined Company is expected to have one of the largest earthmoving rental fleets in the industry. As on March 31, 2017, the companies’ combined fleet totaled $2.2 billion based on original equipment cost (OEC) and consisted of 43,749 units. And the earthmoving fleet of H&E and Neff on a combined OEC basis totaled $727 million and consisted of 8,736 units. This increase in density and geographic coverage will enable H&E to position its fleet to regional pockets of higher demand and thus improve the overall fleet utilization.
- End-user Market Diversification: The transaction will help H&E penetrate in the non-residential construction market. With its large earthmoving fleet, H&E will be in a good position to gain from government infrastructure spending initiatives and will also have a greater exposure to new regional and local customers in construction markets. The earthmoving segment is an underpenetrated segment that offers great opportunities for growth.
- Increased industry expertise: H&E will get access to Neff’s talented employees who will bring with them significant industry expertise. Both companies share a best-in-class commitment to customer service and safety.
Financial implications of the deal
The acquisition is expected to create $25 million to $30 million of synergies annually related to corporate overhead, systems, and operational efficiencies, as well as scale benefits for equipment purchases. H&E expects Neff’s acquisition to enhance its gross tax assets by more than $800 million.
Agreement has a “go-shop” period
Private investment funds managed by Wayzata Investment Partners LLC holding approximately 62.7% of the outstanding common shares of Neff have affected a written consent to approve the transaction, thus providing the required stockholder’s approval for the transaction. However, the agreement covers a “go-shop” period, which runs through August 20, 2017, during which a special committee of Neff’s Board of Directors, with the assistance of its financial and legal advisors, may seek alternative proposals to acquire Neff. Though there is no assurance that this process will result in a superior offer or that any other transactions will be approved or concluded.
Financial and legal advisors for the deal
Wells Fargo Securities, LLC served as the financial advisor to H&E, while Dechert LLP acted as its legal advisor.
Deutsche Bank Securities Inc. and Akin Gump Strauss Hauer & Feld LLP acted as the advisors to the special committee of Neff’s Board of Directors.
Wells Fargo Bank along with affiliate entities have agreed to finance the transaction, subject to certain customary conditions.
About H&E Equipment Services Inc.
H&E is among the largest integrated equipment services companies in the United States with 78 full-service facilities throughout the West Coast, Intermountain, Southwest, Gulf Coast, Mid-Atlantic, and Southeast regions. H&E emphasizes on heavy construction and industrial equipment and rents, sells and provides parts and services support for four core categories of specialized equipment: hi-lift or aerial platform equipment; cranes; earthmoving equipment; and industrial lift trucks.
About Neff Corp.
Neff, based in Miami, is a leading regional equipment rental Company in the United States. The Company offers a broad array of equipment rental solutions for its more than 15,000 customers, focusing on key end user markets including infrastructure, nonresidential construction, energy, and municipal and residential construction.
Last Close Stock Review
On Monday, July 17, 2017, the stock closed the trading session at $21.59, slipping 1.42% from its previous closing price of $21.90. A total volume of 370.93 thousand shares has exchanged hands, which was higher than the 3-month average volume of 285.44 thousand shares. H&E Equipment Services’ stock price rallied 13.69% in the last one month and 12.57% in the previous twelve months. The stock is trading at a PE ratio of 20.74 and has a dividend yield of 5.09%. The stock currently has a market cap of $714.84 million.
At the closing bell, on Monday, July 17, 2017, Neff Corp.’s stock rose slightly by 0.48%, ending the trading session at $20.90. A total volume of 1.81 million shares has exchanged hands, which was higher than the 3-month average volume of 117.78 thousand shares. The Company’s stock price skyrocketed 8.01% in the last three months, 48.75% in the past six months, and 90.17% in the previous twelve months. Moreover, the stock soared 48.23% since the start of the year. The stock is trading at a PE ratio of 15.85 and currently, has a market cap of $471.29 million.
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