United Rentals to acquire National Pump, GulfCo for $780M United Rentals announced that it has entered into a definitive asset purchase agreement to acquire National Pump. Under the terms of the agreement, United Rentals will also acquire GulfCo, a two branch general rental business also based in Texas. The combined purchase price for the assets is approximately $780M. The Board of Directors of United Rentals and the partners of National Pump unanimously approved the proposed transaction...Under the terms of the asset purchase agreement, United Rentals will acquire National Pump for a purchase price of $780M comprised of $765M in cash and $15M in stock. The transaction structure also provides for additional cash consideration based on achievement of certain financial targets. The maximum payouts for these periods is $75M if LTM adjusted EBITDA reaches $134M twelve months post-closing and an additional $50M if LTM adjusted EBITDA reaches $161M eighteen months post-closing. United Rentals expects to receive a cash tax benefit with a net present value of approximately $110M as a result of the acquisition. The purchase price represents a multiple of 7.6x LTM adjusted EBITDA on a gross basis and 6.5x LTM adjusted EBITDA net of the tax benefit. The deal is expected to be accretive to United Rentalsí free cash flow and earnings per share in 2014. The ROIC of National Pump is expected to exceed URIís cost of capital within 18 months, and exceed its 10% hurdle rate in 2016. The transaction will be funded by existing cash and new debt.
On The Fly: Analyst Downgrade Summary Today's noteworthy downgrades include: Autoliv (ALV) downgraded to Underperform from Outperform at Exane BNP Paribas... Baxter (BAX) downgraded to Neutral from Outperform at Credit Suisse... Carter's (CRI) downgraded to Buy from Conviction Buy at Goldman... Fiat Chrysler (FCAU) downgraded to Neutral from Outperform at Exane BNP Paribas... H&E Equipment (HEES) downgraded to Sector Weight from Overweight at KeyBanc... L'Oreal (LRLCY) downgraded to Sell from Neutral at Citi... Marchex (MCHX) downgraded to Equal Weight from Overweight at Stephens... NASDAQ (NDAQ) downgraded to Market Perform from Outperform at Keefe Bruyette... Starbucks (SBUX) downgraded to Buy from Conviction Buy at Goldman... Towers Watson (TW) downgraded to Hold from Buy at Deutsche Bank... Tuesday Morning (TUES) downgraded to Accumulate from Buy at Johnson Rice... United Rentals (URI) downgraded to Sector Weight from Overweight at KeyBanc.