WSC - WillScot Mobile Mini to Acquire McGrath RentCorp for $3.8 Billion Enhancing Its Position as the North American Leader in Turnkey Space Solutions | Benzinga
60% Cash and 40% Stock Transaction Provides McGrath RentCorp Shareholders with $123 Per Share and Upside through Approximately 12.6% Stake in Combined Company
Significant Near-Term Synergies Expected Given WillScot Mobile Mini's Track Record of Integrating Acquisitions and Exceeding Identified Synergy Targets
Strong Financial Profile, with Combined 2023 Revenues of $3.2 Billion and Adjusted EBITDA of $1.4 Billion1, including Expected $50 Million in Run-Rate Operating Synergies
Expecting to Generate Approximately $700 Million of Annual Free Cash Flow2 by End of the First Full Year Following Closing
Joint Conference Call Today at 8:00 a.m. ET to Discuss Details of the Transaction
PHOENIX and LIVERMORE, Calif., Jan. 29, 2024 (GLOBE NEWSWIRE) -- WillScot Mobile Mini Holdings Corp. ("WillScot Mobile Mini" or the "Company") (NASDAQ:WSC), a leader in innovative temporary space solutions, today announced it has entered into a definitive agreement to acquire McGrath RentCorp ("McGrath") (NASDAQ:MGRC), a leading business-to-business rental company based in Livermore, California. The acquisition will enhance WillScot Mobile Mini's position as a North American leader in turnkey space solutions with a complementary geographic footprint and a more diversified platform, providing enhanced value across key customer segments.
McGrath is a leading provider of temporary and permanent space solutions throughout the United States. This complements WillScot Mobile Mini's broad North American footprint and 80-year history as an innovative space solutions provider. The combined company will serve more than 85,000 customers, who will benefit from expanded distribution of Value-Added Products and Services enabling turnkey space solutions, as well as further commercial and operating synergies from the combined branch resources and infrastructure. The combined sales organization and customer base will also have access to the broadest offering of space solutions and supporting operational expertise available in the industry today. The Company expects that the combination will be accretive to earnings per share within twelve months post-closing, based on the Company's successful track record of integrating acquisitions.
"I'm excited to welcome the McGrath team to the WillScot Mobile Mini family," said Brad Soultz, Chief Executive Officer of WillScot Mobile Mini. "The transaction will further accelerate our growth, with combined 2023 pro forma revenue of $3.2 billion and adjusted EBITDA of $1.4 billion1, we will be on path to achieve a $700 million free cash flow run-rate twelve months after we close. Meanwhile, our $1 billion of idiosyncratic growth levers remain in flight, many of which will increase proportionally with the close of the transaction. Among the abundant stockholder benefits associated with this transaction, I am most excited with the prospect of extending our innovative and expansive Value-Added Products portfolio, and our unique FLEX, Cold Storage and Clearspan Space Solutions to McGrath customers. Our long-term capital allocation framework remains unchanged as we continue to accelerate our robust organic growth with highly accretive M&A, all the while creating long-term value for our shareholders."
"This combination provides McGrath customers and employees a platform for continued growth and success, while providing McGrath shareholders with immediate cash value as well as participation in the upside potential of the combined company," said Joseph Hanna, President and Chief Executive Officer of McGrath. "This transaction validates the strength of our business, the hard work and dedication of our team members and the valuable solutions McGrath provides to our customers. For more than 40 years, we have pursued a relentless customer-centric approach and we look forward to extending our ability to provide the solutions that our customers so highly value."
Compelling Strategic and Financial Rationale
Benefits of the transaction include:
- Highly complementary businesses with diversified customer segments: The acquisition brings together two complementary businesses, enhancing diversity across customer segments. The combined company's broad offering, attractive unit economics and long rental durations underpin its uniquely predictable recurring cash flow profile. On a pro forma basis, approximately 90% of combined total revenue is derived from leasing and related services, while the addition of Enviroplex expands WillScot Mobile Mini's permanent modular capabilities.
- Operating synergies with a high confidence of realization: $50 million of run-rate operating synergies expected to be achieved within 24 months of closing. Confidence in targets reinforced by WillScot Mobile Mini's long history of successful M&A integrations.
- Increased scale allowing accelerated rollout of growth initiatives: The combined customer base and rental fleet represent an expanded platform for the rollout of WillScot Mobile Mini's strategic levers, such as Value-Added Products and Services, cross-selling and commercial best practices, and operations excellence. Together, these provide a clear path to multiple years of sustained growth and margin expansion.
- Strong financial position underpins reinvestment in growth: The combined company's strengthened financial profile, enhanced cash generation and de-leveraging capability, and disciplined capital allocation amplify WillScot Mobile Mini's ability to reinvest in growth and compound returns.
The combined company will have a strengthened financial profile, with combined 2023 revenues of $3.2 billion and adjusted EBITDA of $1.4 billion3, including run-rate operating synergies. The combined company expects to capture additional revenue synergies and fleet efficiencies through its combined commercial and branch operations and by leveraging WillScot Mobile Mini's best-in-class technology platform.
WillScot Mobile Mini expects the combined company will generate approximately $700 million of annual free cash flow by end of the first full year following closing, with significant further accretion to free cash flow margins over time.
Transaction Details
McGrath shareholders will receive for each of their shares either $123.00 in cash or 2.8211 shares of WillScot Mobile Mini common stock, as determined pursuant to the election and allocation procedures in the merger agreement under which 60% of McGrath's outstanding shares will be converted into the cash consideration and 40% of McGrath's outstanding shares will be converted into the stock consideration. The transaction values McGrath at an enterprise value of $3.8 billion, including approximately $800 million of net debt, and the per-share consideration represents a premium of 10.1% to McGrath's closing stock price on January 26, 2024.
McGrath shareholders will participate in the significant value-creation opportunity from the transaction through approximately 12.6% ownership stake in the combined company and its track record of value creation through synergy realization. McGrath shareholders will also benefit from a tax-free reorganization under IRC Section 368 for the stock portion of the merger consideration.
WillScot Mobile Mini has secured committed financing for ...