STAMFORD, Conn.–(BUSINESS WIRE)–United Rentals, Inc. (NYSE: URI) today announced that it has entered into a definitive agreement to acquire Yak Access, LLC, Yak Mat, LLC and New South Access & Environmental Solutions, LLC from Platinum Equity for approximately $1.1 billion in cash. The transaction is expected to close in the first quarter of 2024, subject to limited contractual conditions.
Yak is a leader in the North American matting industry with a fleet of approximately 600,000 hardwood, softwood, and composite mats providing surface protection across both construction and maintenance, repair and operations (MRO) applications. Yak predominantly serves customers in the utility and midstream verticals. For the year ended December 31, 2023, Yak generated $171 million of adjusted EBITDA on $353 million of adjusted revenue across over 40 U.S. states.
United Rentals expects to use a combination of new debt financing and existing capacity under its ABL facility to fund the transaction and related expenses.
Strong Strategic Rationale
- Yak creates a new adjacency for United Rentals’ Specialty business with scale in a large and growing segment. This combination will further the company’s ability to deliver value as a one-stop-shop for customers.
- Yak provides immediate cross-sell opportunities to both existing and new customers across construction and MRO applications.
- Yak shares many cultural similarities with United Rentals, including a customer-first business philosophy, long-term customer relationships and a strong focus on safety.
Robust Financial Drivers
- United Rentals sees significant potential to grow the matting business over the next several years, supported by attractive secular opportunities across both the energy and power markets, funded by public and private investments.
- The company expects to realize approximately $166 million in net present value of tax benefits included in the $1.1 billion purchase price.
- The company expects to realize a $7 million benefit to adjusted EBITDA, equivalent to approximately 2% of Yak’s adjusted revenue for 2023, by the end of year two after closing from cost synergies via operational efficiencies and overhead savings.
- The purchase price represents a multiple of 6.4 times adjusted EBITDA for 2023, and an adjusted purchase multiple of 5.2 times, net of tax benefits and cost synergies.
- The company expects the acquisition to be immediately accretive to earnings per share (EPS) and free cash flow (FCF) with an attractive return profile.
- The company expects a pro forma leverage ratio of approximately 1.7 times at closing, taking into account the expected debt financing to fund the acquisition and Yak’s adjusted EBITDA. This is within the company’s target range of 1.5-2.5 times.
- The transaction structure also provides for the potential for additional cash consideration to be paid to the seller, with a maximum payout of $50 million based on revenue attainment in the first two years after closing.
CEO Comments
Matthew Flannery, president and chief executive officer of United Rentals, said, “Our acquisition of Yak further diversifies and differentiates United Rentals’ Specialty business offerings while also driving shareholder returns. This newly created “Matting Solutions” business will create another adjacency for our company with scale in a large and growing market segment. In addition to its attractive profile across growth, margins and returns, this combination builds upon our Power vertical strategy, where significant investment in generation, transmission and distribution is expected over the next several decades.”
Flannery continued, “Yak meets the strategic, financial and cultural criteria we aim for in acquisitions. We expect this new line of business to augment our Specialty offerings as we continue to execute on our strategy of further differentiating ourselves by providing one-stop shop capabilities for our customers. We look forward to welcoming our new team members to the United Rentals family.”
Frank Bardonaro, CEO of Yak, said, “Yak is excited to accelerate its business potential as part of United Rentals. This combination will benefit both our customers and existing employees as our established expertise in access solutions complements the broader value proposition United Rentals offers. I’m proud of the leading company we built and am happy we found a great partner for the next chapter.”
Jacob Kotzubei, co-president of Platinum Equity and Matthew Louie, Managing Director, Platinum Equity, said in a joint statement: “Over the past six years we worked with the Yak team to transform the business and are proud that it is now a stronger and more resilient company ready for the next chapter. United Rentals is an outstanding partner and a great long-term fit for Yak going forward.”
| Key Acquisition and Transaction Statistics | ||
|
Financial information in $ millions |
||
|
Base Purchase Price |
$ |
1,100 |
|
Present Value of Acquired Tax Assets |
$ |
166 |
|
Adjusted Revenue for Yak (calendar year 2023) |
$ |
353 |
|
Adjusted EBITDA for Yak (calendar year 2023) |
$ |
171 |
|
Estimated Annualized Cost Synergies Achieved by End of Year Two |
$ |
7 |
|
Number of Rental Units (i.e. mats) |
|
~600,000 |
|
Revenue Generating States |
|
More than 40 |
Note Regarding Yak Financial Information and Non-GAAP Measures
Adjusted revenue and adjusted net income presented herein for Yak represent only the historical results of the entities to be acquired by United Rentals. See below for a summary of the adjustments made to calculate adjusted revenue and adjusted net income.
Yak’s EBITDA and adjusted EBITDA are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission. The company believes that these non-GAAP financial measures provide useful information about the proposed transaction; however, they should not be considered alternatives to GAAP net income as indicators of operating performance. The table below (in millions) provides a reconciliation between adjusted net income and EBITDA and adjusted EBITDA. EBITDA represents the sum of adjusted net income, depreciation and amortization, and interest expense, net (income tax expense rounded to less than $1 million and is excluded from the reconciliation). Adjusted EBITDA represents EBITDA plus the adjustments detailed below.
|
|
Year ended December 31, 2023 |
||
|
Adjusted net income (1) |
$ |
54 |
|
|
Depreciation and amortization |
|
144 |
|
|
Interest expense, net |
|
66 |
|
|
EBITDA |
$ |
264 |
|
|
One-time charges recorded in connection with refinancing transactions, including gain on extinguishment of debt, net of refinancing transaction expenses |
|
(101) |
|
|
Other adjustments (2) |
|
8 |
|
|
Adjusted EBITDA |
$ |
171 |
|
| 1. Includes an estimate of revenue and net freight profit from mat rentals to a commonly controlled entity that were eliminated in consolidation by Yak that United Rentals expects to recognize prospectively because the commonly controlled entity has agreed to continue to rent the mats. Expenses related to such mat rentals are included in Yak’s historical results. The revenue estimate for mat rentals is based on historical mat rentals, adjusted for an assumption of safety stock, and is calculated using assumed pricing that is similar to the pricing expected following the acquisition. | |||
| 2. Other adjustments include certain costs that do not relate to the post-transaction entity, including certain freights costs to move equipment from closed markets in excess of normal operating movement and prior sponsor costs. | |||
Advisor
Sullivan & Cromwell LLP acted as United Rentals’ legal advisor in the transaction.
About United Rentals
United Rentals, Inc. is the largest equipment rental company in the world. The company has an integrated network of 1,504 rental locations in North America, 38 in Europe, 23 in Australia and 19 in New Zealand. In North America, the company operates in 49 states and every Canadian province. The company’s approximately 26,300 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers approximately 4,800 classes of equipment for rent with a total original cost of $20.66 billion. United Rentals is a member of the Standard & Poor’s 500 Index, the Barron’s 400 Index and the Russell 3000 Index® and is headquartered in Stamford, Conn. Additional information about United Rentals is available at unitedrentals.com.
About Yak
Yak is one of the largest matting providers of ground protection and temporary roadway solutions in the United States. The company has an integrated network of more than 135 distribution points and operates in over 40 states. The company primarily serves powerline and pipeline customers, industrials, renewables, and other infrastructure related industries. The company offers a full suite of solutions, including ~600,000 hardwood, softwood, and composite mats, temporary and permanent access roads, site evaluation, design and installation of access plans, and mat removal and logistics services. Yak is headquartered in Hattiesburg, Mississippi.
