H&E Equipment Services (HEES) M&A announcement summary

Deal rationale and strategic fit

• Combination would expand geographic reach, add density in key regions, diversify customers and markets, and bring a larger, younger fleet.

• Complementary footprints would create leading presence in 11 of the top 20 rental regions and increase urban density in seven of the top 10.

• Combined business expected to operate more than 600 branches with fleet OEC of approximately $10 billion at closing.

Financial terms and conditions

• Each share would receive $78.75 cash and 0.1287 Herc shares, valued at $104.89 using Herc’s 10-day VWAP through Feb. 14, or $104.59 using its Feb. 14 closing price of $200.74.

• Offer represented a 14.0% premium to United Rentals’ $92 cash offer; shareholders would own approximately 14.1% of the combined business.

• Cash consideration funded with $4.5 billion of new debt and Herc ABL availability; existing debt to be refinanced. Pro forma net leverage of 3.8x before synergies, targeted below 3.0x within 24 months.

• Herc’s dividend would be maintained; estimated interest cost on new debt was in the early-to-mid 6% range, depending on final structure.

• Terminating the United Rentals agreement to pursue Herc would trigger a $63,523,892 fee, which Herc agreed to pay on the target’s behalf, subject to repayment in certain termination circumstances.

Synergies and expected cost savings

• Approximately $300 million of incremental EBITDA upside targeted by year three after closing: approximately $125 million in cost synergies and $175 million in EBITDA impact from revenue synergies.

• Revenue synergies estimated at approximately $240 million after 10% dis-synergies, including specialty-fleet cross-selling and general-rental offerings; expected within three years.

• Cost savings expected mainly from corporate-function consolidation, reduced duplicated administrative costs, and scale benefits in facilities, maintenance, and operating overhead; much expected within two years.

• Specialty rental solutions generate more than 800 bps higher average profit margin than general rental; estimated flow-through on $240 million of revenue synergies was about 70%.