United Rentals: H&E Acquisition Termination Is Not a Tragedy

United Rentals announced on Feb. 18 that it no longer intends to acquire H&E Equipment. We were not yet modeling the deal closing, so there is no change to our fair value estimate. United Rentals announced the acquisition on Jan. 14 for $92 per share in an all-cash deal, but that deal contained a “go-shop” period through Feb. 17 during which H&E could solicit another offer. On Feb. 16, H&E received a cash and stock offer from United Rentals' rival Herc Holdings for $104.59 per share, and H&E announced on Feb. 18 that Herc’s offer is a “Superior Proposal” as defined in the United Rentals purchase agreement. H&E, according to United Rentals, intends to enter into a merger agreement with the new buyer provided United Rentals does not offer an improved bid. United Rentals has waived the required four-day negotiating period with H&E to come up with a rebuttal to Herc’s offer. United Rentals CEO Matt Flannery cited financial discipline in not making a new offer. We are fine with the deal not happening for United Rentals as we felt the $92 per share offer did not leave it much room for possible poor execution nor the possible failure to achieve cost synergies of $130 million in EBITDA within 24 months of closing.