Herc Holdings Inc. and H&E Equipment Services: A Strategic Merger to Shape the Equipment Rental Industry

In a pivotal move, H&E Equipment Services has terminated its previous merger agreement with United Rentals, Inc. (NYSE: URI) to pursue this collaboration with Herc. The decision reflects H&E's commitment to aligning with a partner that shares its dedication to excellence in the equipment rental industry.

Under the terms of the agreement, H&E shareholders will receive a compelling compensation package consisting of $78.75 in cash and 0.1287 shares of Herc common stock for each share they own. This translates to a total value of $104.89 per share, based on Herc’s 10-day volume-weighted average price (VWAP) as of February 14, 2025. Post-transaction, H&E’s shareholders will hold approximately 14.1% of the combined company.

Larry Silber, President and CEO of Herc Holdings, expressed enthusiasm for the merger, highlighting it as an "opportunity to accelerate Herc’s proven strategy for industry leading growth." He emphasized the value of H&E’s strong platform and the potential benefits for shareholders, employees, and customers alike.

John M. Engquist, Executive Chairman of H&E, echoed these sentiments, stating that the merger offers "immediate, premium value" while allowing shareholders to partake in the upside from the integration with Herc.

The merger is poised to deliver multiple strategic and financial advantages:

The combined entity will become the third-largest rental company in North America, with a significant presence in 11 of the top 20 rental regions and increased urban density in 7 of the top 10 rental markets. The merger will also feature a larger and younger fleet, thus enhancing the variety of specialty equipment solutions available.

The transaction is expected to realize annual EBITDA synergies of approximately $300 million by the end of year three post-closure, comprising about $125 million in cost synergies and $175 million in revenue synergies. This strong synergy potential underscores the strategic rationale behind the merger.

The merger is projected to be highly accretive to Herc’s cash earnings per share, with expectations of high single-digit accretion in 2026, ramping up to over 20% as synergies are fully realized.

Upon completion, the combined company is expected to generate revenues and EBITDA of approximately $5.2 billion and $2.5 billion, respectively, with continued revenue growth anticipated above market rates. The merger will also improve adjusted EBITDA margins, further enhancing the financial health of the organization.

The transaction will initially result in a net leverage ratio of 3.8x, which is projected to decrease to below 3.0x within 24 months post-closing. Herc has committed to maintaining its dividend, signifying confidence in the financial stability of the merged entity.

With the merger, a re-rating of the combined company’s valuation multiple is anticipated, aligning it with comparable companies in the sector. This is expected to attract greater investor interest and enhance liquidity.

Herc intends to initiate a tender offer to acquire all outstanding shares of H&E common stock at the agreed price. Upon completion of the tender offer, Herc will execute a second-step merger to acquire any remaining shares not tendered.

This transaction is expected to close by mid-2025, contingent upon the majority of H&E’s shares being tendered, regulatory approvals, and other closing conditions. Herc has secured committed financing for the cash portion of the acquisition.

In accordance with the prior agreement with United Rentals, Herc has paid a termination fee of approximately $63.5 million, showcasing its commitment to moving forward with the H&E acquisition.

Herc Holdings Inc.'s merger with H&E Equipment Services represents a transformative moment for both companies and the equipment rental industry at large. With significant strategic and financial benefits anticipated, this merger not only enhances Herc’s position in the market but also promises to deliver value to shareholders and customers alike. As both companies gear up for the merger's completion, industry observers will be keenly watching how this alliance unfolds in the competitive landscape of equipment rental services.

For more information, visit Herc Holdings' Investor Relations section, where presentation materials and details of the associated conference call are available.