Cerberus deal for United Rentals falls apart

Posted Nov 15th 2007 2:39PM by Tom Taulli
Filed under: Private Equity

Yesterday, United Rentals Inc. (NYSE: URI) published an ominous press release saying that its private equity sponsor, Cerberus Capital Management, "is not prepared to proceed with" the $7 billion transaction. Of course, with the uncertainty in lending markets, this should not necessarily be a surprise. Nonetheless, the shares of United Rentals plunged 30%.

United Rentals is the largest equipment rental company in the US. Annual revenues are about $3.7 billion and EBITDA is about $1.1 billion (which is always something private equity folks like to see).

If you take a look at the merger agreement, the break-up fee is $100 million. That's a pittance for Cerberus. In other words, if the cost of financing has spiked -- making a deal much more expensive -- why not just pay the $100 million? But the question is: may United Rentals have a case for requiring the deal to get done? Well, that's where things get fuzzy. I'm really not sure.

That's a good question for attorneys. And, yes, United Rentals has retained Orans, Elsen & Lupert LLP. So we may see showdown in the Delaware courts. If you want to see a great analysis of the legal argument, you can check out the M & A Law Prof Blog.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

Tags: Cerberus Capital Management, CerberusCapitalManagement, United Rentals, UnitedRentals, URI

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Reader Comments (Page 1 of 1)

11-15-2007 @ 2:55PM

tiredofCERERUS INVESTMENTS said...

CERBERUS INVESTMENTS IS OUT TO BUY ANYTHING THEY CAN AND SCREW THE EMPLOYEES , END UP LAYING THEM OFF . OR YOU MIGHT SAY , CLOSE THE PLANT AFTER THEY BUY IT , AND LAY EVERYONE EMPLOYEES OFF , I SEEN THAT HAPPEN SEVERAL TIMES SINCE LAST YEAR OCT 2006.

CERBERUS DOESN'T CARE WHO GOES DOWN / END UP LOSSING THERE JOBS . CERBERUS BROUGHT OUT TOWER AUTOMOTIVE , PART OF GM , CHRYSLER AND WHOEVER THEY CAN SELL OUT. MANY PEOPLE HAS LOST THERE JOBS BECAUSE OF CEBERUS ......SHAME ON THEM AND ALL THERE INVESTORS.........THANKS FOR NOTHING ..........

11-15-2007 @ 3:31PM

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12-31-2007 @ 11:29AM

mibluegal1 said...

My husband was one of those that was screwed by UR- worked there his whole life only to be thrown out with 6 weeks of thanks for nothing pay and into the Michigan economy no less.I hope those people can sleep at night because they are killing the American dream.Because of the deal falling through their stock is in the toliet and that is where it should be.Shame on you UR for treating people like dirt.