United Rentals Inc. said Friday it has agreed to buy rival equipment rental company RSC Holdings Inc. for about $1.9 billion in cash and stock.
Shares of RSC surged 55 percent in afternoon trading Friday while United Rentals rose more than 3 percent.
United Rentals, based in Greenwich, Conn., said the deal is expected to accelerate its growth with industrial customers, lower costs and provide a less volatile revenue stream. It said it has already identified $200 million in potential cost savings.
The $18-per-share offered price is a 58 percent premium to RSC's closing price on Thursday. RSC shares climbed $6.30, or 55.3 percent, to $17.67 in afternoon trading. United Rental shares rose 92 cents, or 3.5 percent, to $27.95.
The deal has been approved by both companies' boards and is expected to be completed in the first six months of 2012.
When the deal closes, each outstanding share of RSC common stock will be converted into the right to receive $10.80 in cash and 0.2783 of a share of United Rentals common stock. But the deal is subject to certain closing conditions, including regulatory approval and clearance of any antitrust hurdles.
To help finance it, United plans to buy back up to $200 million in stock within six to twelve months after the close.
United is the world's largest equipment rental company, with a network of 541 rental locations in 48 states and 10 Canadian provinces. The company has about 7,500 employees.
RSC Holdings, which is based in Scottsdale, Ariz., has a network of 452 branches across 42 states and three provinces in Western Canada. It has more than 4,600 employees.
RSC services the industrial, maintenance and non-residential construction markets while United serves construction and industrial customers, utilities, municipalities, homeowners and others.
The president and CEO of United Rentals, Michael Kneeland, and its chairman, Jenne Britell, will keep their positions at the combined company.
Including the assumption of debt, the deal is worth $4.2 billion.