WillScot Mobile Mini Holdings Corp. announced Monday that it will acquire modular rental provider McGrath RentCorp in a $3.8 billion deal. The acquisition aims to solidify WillScot’s position as a leading provider of modular space and portable storage solutions across North America.
Under the terms of the agreement, McGrath shareholders will receive $123 per share, comprised of 60% cash and 40% WillScot stock. This reflects a 10.1% premium over McGrath’s share price as of January 26th. Once completed, McGrath shareholders will own approximately 12.6% of the combined company.
The deal comes as WillScot looks to expand its footprint and diversify its customer segments through McGrath’s complementary business. McGrath serves over 10,000 business customers with modular building leasing and sales solutions across the U.S.
According to WillScot CEO Brad Soultz, “The transaction will further accelerate our growth, with combined 2023 pro forma revenue of $3.2 billion and adjusted EBITDA of $1.4 billion, we will be on path to achieve a $700 million free cash flow run-rate twelve months after we close.”
WillScot expects to realize $50 million in run-rate cost synergies within two years following the close of the acquisition in Q2 2024. The company has a track record of successfully integrating past deals and meeting synergy targets.
The combined company will be able to cross-sell value-added products and services and roll out operations best practices across the broader customer base. It will also have increased scale and expanded infrastructure to accelerate organic growth strategies already in place.
Along with revenue and cost synergies, the deal provides WillScot with greater geographic diversification and depth in adjacent sectors like electronic test equipment rental through McGrath’s TRS-RenTelco business.
On the financial front, the combined company is projected to generate approximately $3.2 billion in revenue and $1.4 billion in adjusted EBITDA in 2023. It expects to produce around $700 million in free cash flow within twelve months after the merger is finalized.
To fund the cash component of the acquisition, WillScot has secured committed bridge financing of $1.75 billion, along with expanded capacity from its existing credit facilities. The company is committed to rapid deleveraging and plans to achieve a 3.0-3.5x net leverage ratio within a year post-close.
McGrath’s board has unanimously approved the transaction. With shareholder approval and regulator sign-off, the buyout is anticipated to close during Q2 2024. Until then, McGrath will operate as an independent, publicly traded company.
The acquisition is the latest in WillScot’s strategy to capitalize on demand growth for modular space and storage solutions. The company has acquired over 15 businesses since going public in 2017, including the transformative $1.2 billion merger with Mobile Mini in 2020.
For McGrath shareholders, the deal provides a significant premium and ongoing upside through ownership stake in WillScot. It also enables McGrath’s rental solutions to reach a wider audience through WillScot’s expansive branch network and customer base.