Construction and infrastructure equipment rental company NEFF Corp (NEFF 25.95, +4.10) trades about +18.8% higher this afternoon after its Board of Directors announced the receipt of a “Superior Proposal” to acquire the company for $25.00 per share in cash from H&E Equipment (HEES 21.28, -0.31 -1.44%). Today’s Superior Proposal comes about four weeks after HESS offered $21.07 per share in mid-July. The go-shop period for the mid-July deal was August 20, 2017.
Per today’s updated merger agreement, HEES has certain matching rights, including the right to propose modifications to the terms of the merger agreement and related agreements prior to the expiration of a five business day period. The company is required to, and intends to, negotiate in good faith with HEES during this period.
Under today’s merger agreement, the company is also required to pay a $13.2 million termination fee to HEES if the company terminates the Existing Merger Agreement in order to enter into an agreement with the bidder. The bidder has agreed to pay the termination fee to HEES on the company’s behalf in such event.
Likely unchanged, in the mid-July merger announcement NEFF and HEES estimated the deal would create $25-30 million of synergies annually related to corporate overhead, systems and operational efficiencies, as well as scale benefits for equipment purchases. Additionally, the deal was expected to generate in excess of $800 million of gross tax assets for HEES arising from a step-up in the basis of certain of NEFF’s assets.
As of March 31, 2017, the companies’ combined fleet totaled $2.2 billion based on original equipment cost (OEC) and consisted of 43,749 units. The addition of NEFF’s fleet will be highly complementary to HEES’s concentration in aerial work platform equipment and the combined company will possess one of the largest earthmoving rental fleets in the industry.