United Rentals Enters the Pump Rental Business with the Acquisition of National Pumps

(March 24, 2014) – Last year was a good year for the equipment rental industry. According to the American Rental Association’s (ARA) Rental Market Monitor, North American equipment rental revenue totaled $38 billion in 2013, with the U.S. reporting revenue of $33.3 billion and Canada adding an additional $4.7 billion. This represents a 6.4 percent growth rate over 2012. The construction and industrial equipment rental segment is the largest segment with U.S. revenues of $22.3 billion and a growth rate of 7.3 percent in 2013. ARA projects that North American rental revenue will grow to $41.1 billion in 2014 and $52.3 billion by 2017.

United Rentals Inc. of Stamford, Conn. is entering the pump rental market by acquiring the second largest specialty pump rental company in North America. The purchase includes certain assets of National Pump & Compressor Ltd., Canadian Pump and Compressor Ltd., GulfCo Industrial Equipment LP and LD Services LLC – collectively known as National Pump.

National Pump was founded in 2007 and is a leader in high growth energy-related end markets, with upstream oil and gas customers representing about 50 percent of its revenue. The acquired assets had revenue of $211 million over the last twelve months and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $103 million, representing an adjusted EBITDA margin of 49 percent. National Pump has 31 locations in the U.S. and 4 in western Canada.

National Pump offers centrifugal, self-priming, venturi prime, vacuum prime, high volume, high pressure, water and portable pumps for all industrial uses. The company had revenue growth of approximately 50 percent per year from 2010 to 2013 through a combination of adding new locations, offering customized pump configurations and specialized training, along with a strong safety record.

United Rentals will pay $765 million in cash and $15 million in restricted stock for National Pump. The purchase price represents a multiple of 7.6x based on National Pump’s adjusted EBITDA for the last twelve months. The agreement includes additional cash payments based on the achievement of certain financial targets – $75 million if EBITDA reaches $134 million twelve months after closing and an additional $50 million if EBITDA grows to $161 million eighteen months after closing. United Rentals expects the acquisition to be accretive to free cash flow and earnings per share in 2014. Key members of National Pump’s management team will be joining United Rentals and will continue to lead the company.

United Rentals is the largest equipment rental company in the world with 832 locations in 49 states and 10 Canadian provinces. The company had revenue of almost $5 billion in 2013. National Pump will provide United Rentals with significant cross-selling and expansion opportunities and increase United Rentals penetration in the energy market. United Rentals plans to double the size of the pump business within five years.

National Pump will become a part of United Rental’s Specialty Rentals business. Combined the businesses will make up 19 percent of United Rentals’ total revenue. United Rentals intends to expand its Specialty Rentals business to $1 billion in revenue by 2015. The business segment opened 18 new branches in 2013 and plans to open another 13 branches this year.

— By G. Cook Jordan, Jr. and Lori A. Callaway, Jordan, Knauff & Company. Based in Chicago, Illinois, Jordan, Knauff & Company is an investment bank that provides merger and acquisition advisory services to the pump, valve and filtration industries.