National Equipment Services (NES), a US rental company that is in general equipment as well as cranes, has acquired the operations of Brambles Equipment Services Inc, the North American equipment rental operation of Brambles Industries, based in Australia. The deal was announced on 2 January.
The $122m acquisition was financed through NES’s $650m credit facility.
Brambles Equipment Services Inc (or BESI) has its headquarters in Detroit and includes 39 locations in 16 states and the Canadian province of Ontario. Its equipment rental portfolio has an average age of less than four years and consists of a wide range of lifting, access and other equipment for construction, maintenance and infrastructure projects. In fiscal 2001 (ended June 30), these operations generated approximately $170m in annual sales and $46m in EBITDA.
The acquisition brings together two companies built up by the same man. NES chief executive officer Kevin Rodgers became the first CEO of BESI in 1991 before quitting to set up NES in 1996.
‘We are very excited about this acquisition,’ said Rodgers. ‘It is attractive for us on a number of levels. We are gaining a significant number of very experienced and capable employees with diverse equipment rental backgrounds. It significantly increases our presence in the Midwest, giving us the critical mass necessary to enhance our profitably and returns – even based on current demand and rental rates. It gives NES a significant presence in the automotive sector, where BESI has achieved significant growth as a ‘Tier 1 Supplier’ to the ‘Big Three’ manufacturers. There is overlap in about 17 of our 35 Central Region markets.
‘In addition to the benefits of increased market share in those areas, we have identified about $10 million in annual cost savings that can be realised by consolidating operations and improving efficiencies. We estimate the combined operation will generate annual revenue of about $800m, which will make NES the fourth-largest company in its industry. The acquisition improves our credit by decreasing our leverage, due to purchasing the business at an attractive cash flow multiple.’
Rodgers said that the purchase also helped reduce debt. ‘Immediately prior to the acquisition, NES had $495m outstanding on its line of credit,’ he explained. ‘As a result, we exceeded our primary financial goal for the year of reducing debt by $100m – actually reaching about $102m. We were able to achieve this despite a very challenging operating environment.’
Rodgers continued: ‘We believe BESI should add $160m to 170m in annual revenues beginning next year. We also could see about a $50m increase in annual EBITDA levels, and accretion of at least 20 cents in earnings per share. As a result, even at current pricing and levels of demand for equipment rental services, we believe NES will return to profitability in 2002.”
