WillScot Mobile Mini to Acquire McGrath RentCorp for $3.8 Billion,
Enhancing Its Position as the North American Leader in Turnkey
Space Solutions
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 the
transaction by way of a $1.75 billion senior secured bridge credit
facility (“Bridge Facility”), which along with borrowings under
WillScot Mobile Mini’s ABL revolving credit facility (“ABL
Facility”) will fund the cash portion of the purchase price and the
repayment of McGrath’s outstanding debt. In addition, WillScot
Mobile Mini has secured commitments to upsize its existing $3.7
billion ABL Facility by $750 million to $4.45 billion.
WillScot Mobile Mini is committed to deleveraging and expects to
achieve pro forma net leverage within the Company’s target range of
3.0x – 3.5x within 12 months post-closing.
Path to Completion
All directors for the respective Boards of WillScot Mobile Mini
and McGrath adopted and approved the transaction. The transaction
is expected to close in the second quarter of 2024 and is subject
to approval by McGrath shareholders, regulatory approvals and other
customary closing conditions.
Conference Call
WillScot Mobile Mini Holdings and McGrath will host a conference
call and webcast to discuss this announcement at 8:00 a.m. Eastern
Time on Monday, January 29, 2024. To access the live webcast, use
the following link:
https://register.vevent.com/register/BI526d1ecd2f344dc99435f14adb0f357f
You will be provided with dial-in details after registering. To
avoid delays, we recommend that participants dial into the
conference call 15 minutes ahead of the scheduled start time. A
live webcast will also be accessible via the "Events &
Presentations" section of the Company's investor relations website
www.willscotmobilemini.com. Choose "Events" and select the
information pertaining to the WillScot Mobile Mini Holdings McGrath
Acquisition Conference Call. Additionally, there will be slides
accompanying the webcast. Please allow at least 15 minutes prior to
the call to register, download and install any necessary software.
For those unable to listen to the live broadcast, an audio webcast
of the call will be available for 12 months on the Company’s
investor relations website.
Advisors and Financing Sources
BofA Securities served as financial advisor, Rothschild & Co
served as financing advisor and Allen & Overy LLP acted as
legal counsel to WillScot Mobile Mini. Goldman Sachs & Co. LLC
served as financial advisor and Morrison & Foerster LLP acted
as legal counsel to McGrath.
JPMorgan Chase Bank, N.A., Wells Fargo Bank,
N.A., MUFG Bank, Ltd., Deutsche Bank AG, acting through its
branches, Bank of America, N.A., and Bank of Montreal provided
financing commitments for the upsize to the ABL Facility and/or the
Bridge Facility in connection with the transaction.
About WillScot Mobile Mini
WillScot Mobile Mini trades on the Nasdaq stock exchange under
the ticker symbol “WSC.” Headquartered in Phoenix, Arizona, the
Company is a leading business services provider specializing in
innovative and flexible temporary space solutions. The Company’s
diverse product offering includes modular office complexes, mobile
offices, classrooms, temporary restrooms, portable storage
containers, blast protective and temperature-controlled structures,
clearspan structures, and a thoughtfully curated selection of
furnishings, appliances, and other services so its solutions are
turnkey for customers. WillScot Mobile Mini services diverse end
markets across all sectors of the economy from a network of
approximately 240 branch locations and additional drop lots
throughout the United States, Canada, and Mexico. Additional
information about WillScot Mobile Mini can be found on the
company’s website at www.willscotmobilemini.com.
About McGrath RentCorp
McGrath RentCorp is a leading business-to-business rental
company in North America with a strong record of profitable
business growth. Founded in 1979, McGrath’s operations are centered
on modular solutions through its Mobile Modular and Mobile Modular
Portable Storage businesses. In addition, its TRS-RenTelco business
offers electronic test equipment rental solutions. The Company’s
rental product offerings and services are part of the circular
supply economy, helping customers work more efficiently, and
sustainably manage their environmental footprint. With over 40
years of experience, McGrath’s success is driven by a focus on
exceptional customer experiences. This focus has underpinned the
Company’s long-term financial success and supported over 30
consecutive years of annual dividend increases to shareholders, a
rare distinction among publicly listed companies. Additional
information about McGrath RentCorp can be found on the company’s
website at www.mgrc.com/.
Non-GAAP Financial Measures Relating to WillScot Mobile
Mini
This press release includes non-GAAP financial measures,
including Adjusted EBITDA Margin, Free Cash Flow and Net CAPEX.
Adjusted EBITDA is defined as net income (loss) plus net interest
(income) expense, income tax expense (benefit), depreciation and
amortization adjusted to exclude certain non-cash items and the
effect of what we consider transactions or events not related to
our core business operations, including net currency gains and
losses, goodwill and other impairment charges, restructuring costs,
costs to integrate acquired companies, costs incurred related to
transactions, non-cash charges for stock compensation plans, gains
and losses resulting from changes in fair value and extinguishment
of common stock warrant liabilities, and other discrete expenses.
Free Cash Flow is defined as net cash provided by operating
activities, less purchases of, and proceeds from, rental equipment
and property, plant and equipment, which are all included in cash
flows from investing activities. Net CAPEX is defined as purchases
of rental equipment and refurbishments and purchases of property,
plant and equipment (collectively, "Total Capital Expenditures"),
less proceeds from the sale of rental equipment and proceeds from
the sale of property, plant and equipment (collectively, "Total
Proceeds"), which are all included in cash flows from investing
activities. The Company believes that Adjusted EBITDA is useful to
investors because it (i) allows investors to compare performance
over various reporting periods on a consistent basis by removing
from operating results the impact of items that do not reflect core
operating performance; (ii) is used by our board of directors and
management to assess our performance; (iii) may, subject to the
limitations described below, enable investors to compare the
performance of the Company to its competitors; (iv) provides
additional tools for investors to use in evaluating ongoing
operating results and trends; and (v) aligns with definitions in
our credit agreement. The Company believes that Free Cash Flow is
useful to investors because it allows investors to compare cash
generation performance over various reporting periods and against
peers. The Company believes that the presentation of Net CAPEX
provides useful information to investors regarding the net capital
invested into our rental fleet and plant, property and equipment
each year to assist in analyzing the performance of our business.
Adjusted EBITDA is not a measure of financial performance or
liquidity under GAAP and, accordingly, should not be considered as
an alternative to net income or cash flow from operating activities
as an indicator of operating performance or liquidity. These
non-GAAP measures should not be considered in isolation from, or as
an alternative to, financial measures determined in accordance with
GAAP. Other companies may calculate Adjusted EBITDA and other
non-GAAP financial measures differently, and therefore the
Company's non-GAAP financial measures may not be directly
comparable to similarly-titled measures of other companies.
Information regarding the most comparable GAAP financial
measures and reconciling forward-looking Adjusted EBITDA to those
GAAP financial measures is unavailable to the Company without
unreasonable effort. We cannot provide the most comparable GAAP
financial measures nor reconciliations of forward-looking Adjusted
EBITDA to GAAP financial measures because certain items required
for such reconciliations are outside of our control and/or cannot
be reasonably predicted, such as the provision for income taxes.
Preparation of such reconciliations would require a forward-looking
balance sheet, statement of income and statement of cash flow,
prepared in accordance with GAAP, and such forward-looking
financial statements are unavailable to the Company without
unreasonable effort. Although we provide a range of Adjusted EBITDA
that we believe will be achieved, we cannot accurately predict all
the components of the Adjusted EBITDA calculation. The Company
provides Adjusted EBITDA guidance because we believe that Adjusted
EBITDA, when viewed with our results under GAAP, provides useful
information for the reasons noted above.
Forward-Looking Statements
This press release contains forward-looking statements
(including the guidance/outlook contained herein) within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995 and Section 21E of the Securities Exchange Act of 1934, as
amended. The words "estimates," "expects," "anticipates,"
"believes," "forecasts," "plans," "intends," "may," "will,"
"should," "shall," "outlook," "guidance," "see," "have confidence"
and variations of these words and similar expressions identify
forward-looking statements, which are generally not historical in
nature. Certain of these forward-looking statements include
statements relating to: our mergers and acquisitions pipeline,
acceleration of our run rate, acceleration toward and the timing of
our achievement of our three to five year milestones, growth and
acceleration of cash flow, driving higher returns on invested
capital, and Adjusted EBITDA margin expansion, as well as
statements involving the proposed acquisition of McGrath, including
anticipated time of closing, the expected scale, operating
efficiency and synergies, stockholder, employee and customer
benefits, the amount and timing of revenue and expense synergies,
future financial benefits and operating results, expectations
relating to the combined customer base and rental fleet, and tax
treatment for the acquisition. Forward-looking statements are
subject to a number of risks, uncertainties, assumptions and other
important factors, many of which are outside our control, which
could cause actual results or outcomes to differ materially from
those discussed in the forward-looking statements. Certain of these
forward-looking statements relate to the proposed transaction,
including: expected scale; operating efficiency; stockholder,
employee and customer benefits; key assumptions; timing of closing;
the amount and timing of revenue and expense synergies; future
financial benefits and operating results; and integration spend.
Although the Company believes that these forward-looking statements
are based on reasonable assumptions, they are predictions and we
can give no assurance that any such forward-looking statement will
materialize. Important factors that may affect actual results or
outcomes include, among others, our ability to acquire and
integrate new assets and operations; our ability to judge the
demand outlook; our ability to achieve planned synergies related to
acquisitions; regulatory approvals; our ability to successfully
execute our growth strategy, manage growth and execute our business
plan; our estimates of the size of the markets for our products;
the rate and degree of market acceptance of our products; the
success of other competing modular space and portable storage
solutions that exist or may become available; rising costs and
inflationary pressures adversely affecting our profitability;
potential litigation involving our Company; general economic and
market conditions impacting demand for our products and services
and our ability to benefit from an inflationary environment; our
ability to maintain an effective system of internal controls; and
such other risks and uncertainties described in the periodic
reports we file with the SEC from time to time (including our Form
10-K for the year ended December 31, 2022), which are available
through the SEC’s EDGAR system at www.sec.gov and on our website.
Any forward-looking statement speaks only at the date on which it
is made, and the Company disclaims any obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law.
Additional Information and Where to Find It
In connection with the proposed transaction, WillScot Mobile
Mini will file with the SEC a registration statement on Form S-4
that will include a proxy statement of McGrath and that will also
constitute a prospectus of WillScot Mobile Mini. INVESTORS AND
SECURITY HOLDERS ARE ADVISED TO READ THE REGISTRATION STATEMENT AND
PROXY STATEMENT/PROSPECTUS WHEN THEY BECOME AVAILABLE, BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PARTIES AND THE
PROPOSED TRANSACTION. Investors and security holders may obtain a
free copy of the proxy statement/prospectus (when available) and
other documents filed with the SEC by WillScot Mobile Mini and
McGrath at the SEC’s web site at http://www.sec.gov. Free copies of
these documents, once available, and WillScot Mobile Mini’s other
filings with the SEC, may also be obtained from WillScot Mobile
Mini’s web site at www.willscotmobilemini.com.
Participants in the Solicitation
This press release is not a solicitation of a proxy from any
investor or security holder. However, WillScot Mobile Mini, McGrath
and certain of their respective directors, executive officers and
other members of management and employees, may be deemed to be
participants in the solicitation of proxies from shareholders of
McGrath in respect of the proposed transaction under the rules of
the SEC. Information regarding WillScot Mobile Mini’s directors and
executive officers is available in WillScot Mobile Mini’s 2022
Annual Report on Form 10-K filed with the SEC on February 22, 2023,
and in its definitive proxy statement for its annual meeting of
stockholders filed on April 17, 2023. Information regarding
McGrath’s directors and executive officers is available in
McGrath’s 2022 Annual Report on Form 10-K filed with the SEC on
February 22, 2023, and in its definitive proxy statement for its
annual meeting of shareholders filed on April 28, 2023. These
documents as well as other documents filed by WillScot Mobile Mini
and McGrath with the SEC can be obtained free of charge from the
sources indicated above. Other information regarding the
participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise,
will be contained in the registration statements, prospectuses and
proxy statement and other relevant materials to be filed with the
SEC when they become available.
No Offer or Solicitation
This press release shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Contact Information
For WillScot Mobile Mini
Investor inquiries:
Nick Girardi
investors@willscotmobilemini.com
Media inquiries:
Jake Saylor
Jake.saylor@willscot.com
For McGrath
Investor inquiries:
Keith E. Pratt, EVP & Chief Financial Officer
Keith.Pratt@mgrc.com
Media inquiries:
MediaRelations@MGRC.com
1 Based on midpoints of guidance for each company.
Adjusted EBITDA unburdened for stock-based compensation,
transaction costs, and other non-recurring expenses.
2 Calculated as cash flow from operating activities less
Net CapEx. Excludes any purchase accounting impact.
3 Based on midpoints of guidance for each company.
Adjusted EBITDA unburdened for stock-based compensation,
transaction costs, and other non-recurring expenses.
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