WillScot acquisition of McGrath called off

WillScot Holdings Corporation has reached an agreement with McGrath RentCorp to terminate the acquisition of the portable accommodation and storage rental company.

In a statement, WillScot said that although both parties “believe in the merits and procompetitive benefits of the combination”, the transaction has been cancelled as there is “no commercially reasonable path to clear the necessary regulatory requirements.”

It added that although the companies had worked for months with the U.S. Federal Trade Commission (FTC) to meet requirements, it had become evident that “the path to regulatory clearance would be excessively onerous” and “detract from from the execution of other value creating initiatives inherent in WillScot’s business.”

As part of the merger agreement, McGrath said it will receive a termination fee of $180 million.

WillScot CEO Brad Soultz said although he is disappointed the collapse of the deal, he believes numerous opportunities to deliver growth and returns remain for the company.

He said, “WillScot’s position as the leading provider of temporary space solutions has never been stronger. With our relentless focus on execution on behalf of our customers, we are realising opportunities to improve efficiency and profitability across many of our core commercial and operational capabilities.

“Through our investments in product innovation and adjacent offerings, we are introducing new alternatives for customers in the marketplace. These commercial and operational initiatives represent over $1 billion of prospective Adjusted EBITDA growth potential.

“When combined with the natural resilience and predictability of our lease portfolio, this gives us multi-year visibility and conviction in our long-term outlook.”

Joseph Hanna, president and CEO of McGrath, added, “The proposed transaction was a recognition of the enormous value created by our talented employees. Now, our team is energized and ready to execute our standalone strategy, and I am proud of the focus and tenacity the McGrath team demonstrated throughout this process.

At the same time, WillScot has increased the existing share repurchase program to $1 billion.

Tim Boswell, president and chief financial officer, WillScot, said, “Our long term outlook remains clear. With the obvious overhang on our valuation related to the McGrath transaction, our Board of Directors increased our share repurchase authorization to $1 billion.

“We will deploy the repurchase authorisation thoughtfully, as we have in the past, while funding organic investments in our business and pursuing smart tuck-in acquisitions.”

The planned merger would have created one of the largest portable accommodation and storage rental business, generating annual revenues of $3.2 billion in 2023.