United Rentals said Tuesday that it won't up its $92 per share cash bid for H&E Equipment Services, after H&E received a higher offer from Herc Holdings. URI stock fell in morning stock market action, though investors won't walk away empty-handed, while HEES soared on the higher deal price.
United Rentals will claim a $63.5 million breakup fee for its trouble. The company said it will immediately resume its buyback of URI stock.
United Rentals: What Failed Deal Means
URI had suspended buybacks with an aim to bring down its post-deal debt ratio. The deal would have involved taking on $1.4 billion of H&E debt and additional borrowing to fund the transaction.
However, the loss of the deal means a foregone boost to profitability and likely sturdier competition. United Rentals previously said the deal would have boosted earnings per share and free cash flow within the first year. URI said the decision to walk away reflects "our commitment to financial discipline."
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Herc Holdings, formerly part of Hertz Holdings, made a counteroffer initially worth $104.89 a share, including $78.75 a share in cash and 0.1287 shares of HRI stock.
Herc said the deal would position the company as the No. 3 equipment rental company in North America. It expects the deal to create $300 million in operating synergies within three years.
HRI And URI Stock Performance
URI stock dropped 3.6% in morning trade. The stock has slipped below its converged 50-day and 200-day moving averages, reflecting a weakening of institutional support.
HRI gapped down 14.9%, possibly on risk that the deal won't go as smoothly as hoped.
HEES leaped 11.9% to 97.61, only slightly below the new effective offer price worth $100.22 per share, after HRI stock's morning tumble.
