H&E Equipment Services Signs Definitive Agreement To Acquire Lewistown Rental and Affiliated Companies

Rhea-AI Summary

H&E Equipment Services, Inc. (HEES) announced the acquisition of Lewistown Rental and its affiliated operations in Montana, expanding its equipment rental business. The $28.5 million transaction is set to close in Q2 2024, enhancing H&E's presence in non-residential, industrial, and agricultural markets.

Insights

Market Research Analyst

The acquisition of Lewistown Rental by H&E Equipment Services represents a strategic expansion into underserved markets within Montana. This move aligns with the broader industry trend towards consolidation, as companies aim to leverage economies of scale and widen their geographic footprint. The transaction's estimated fleet value of $28.5 million underscores the significance of this expansion for H&E, potentially enhancing its competitive position in the equipment rental sector.

From a market perspective, the diversification into non-residential, industrial and agricultural end markets could mitigate risks associated with market volatility. The presence in multiple markets may provide a buffer against sector-specific downturns, contributing to more stable revenue streams. Additionally, the growth prospects in Montana for non-residential construction and agricultural production could signal increased equipment demand, benefiting H&E's utilization rates and revenue growth.

However, investors should monitor the integration process post-acquisition, as the success of such expansions largely depends on effective assimilation of the new operations and maintenance of customer relationships. The impact on H&E's financials will also depend on the deal's final terms, financing mechanisms and the subsequent operational efficiency achieved.

Financial Analyst

H&E's acquisition of Lewistown Rental comes with a tangible asset base, which is critical for valuation purposes. The $28.5 million fleet value contributes directly to H&E's asset base, potentially improving loan collateral and credit terms. Investors should note the acquisition's timing, set for the second quarter of 2024, which provides a clear timeline for financial forecasting and integration planning.

It is essential to evaluate the acquisition's impact on H&E's balance sheet, particularly concerning debt levels and return on investment. The deal's financing will be a key determinant of its success, with cash deals typically being immediately accretive to earnings per share, while stock-based transactions can dilute existing shareholders.

Long-term benefits may include increased market share and revenue growth, but these must be weighed against the costs of acquisition and any potential cultural or operational integration challenges. The forecasted improvement in regional growth sectors is a positive indicator, but this must translate into actual financial performance to benefit shareholders.

Construction Industry Analyst

The equipment rental industry is closely tied to the health of the construction sector, particularly non-residential construction which is a key end market for Lewistown Rental. The mention of rising demand in commercial and infrastructure projects within Montana suggests a favorable environment for H&E's expanded operations. This could lead to increased rental activity, higher utilization rates and an upswing in rental rates.

However, the success of this acquisition will also depend on H&E's ability to navigate the unique challenges of the local markets, including the management of a diverse fleet that caters to different industry needs. The company's ability to provide a comprehensive mix of equipment tailored to the regional customer base will be important for capturing market share from competitors.

Investors should consider the potential for increased operational costs associated with managing additional locations and the need for localized marketing strategies to penetrate these new markets effectively. The long-term impact on H&E will also hinge on the stability of the construction and agricultural sectors in Montana, as any downturn could negatively affect equipment rental demand.

BATON ROUGE, La.--(BUSINESS WIRE)-- H&E Equipment Services, Inc. (“H&E” or the “Company”) (NASDAQ: HEES) today announced the signing of a definitive agreement to acquire Lewistown Rental, a Lewistown, Montana-based equipment rental business and three of its affiliated rental operations in Havre, Glasgow and Great Falls, Montana. Each location serves multiple end markets, including non-residential, industrial and agriculture. The company and its affiliates deploy a diverse fleet of equipment with a total estimated fleet value, as measured by original equipment cost, of $28.5 million. The transaction is expected to close in the second quarter of 2024, following the satisfaction of customary closing conditions.

Brad Barber, chief executive officer of H&E, stated, “Lewistown Rental, together with its affiliated operations, has demonstrated impressive growth over the past several years by addressing a unique customer base across underserved markets in northern and central Montana, utilizing a diverse and comprehensive mix of equipment. Growth prospects in this region and across the state of Montana continue to improve, with rising demand in non-residential construction, including commercial and infrastructure projects, industrial activities and agricultural production. The transaction is expected to complement our existing branch locations in the cities of Billings and Belgrade.”

Following the close of the transaction, H&E’s equipment rental operations will extend across 145 locations in 30 states.

About H&E Equipment Services, Inc.

Founded in 1961, H&E Equipment Services, Inc. is one of the largest rental equipment companies in the nation. The Company’s fleet is among the industry’s youngest and most versatile with a superior equipment mix comprised of aerial work platforms, earthmoving, material handling, and other general and specialty lines. H&E serves a diverse set of end markets in many high-growth geographies and has branches throughout the Pacific Northwest, West Coast, Intermountain, Southwest, Gulf Coast, Southeast, Midwest, and Mid-Atlantic regions.

Forward-Looking Statements

Statements contained in this press release that are not historical facts, including statements about H&E’s beliefs and expectations, are “forward-looking statements” within the meaning of the federal securities laws. Statements containing the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend,” “foresee” and similar expressions constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following: (1) general economic and geopolitical conditions in North America and elsewhere throughout the globe and construction and industrial activity in the markets where we operate in North America; (2) our ability to forecast trends in our business accurately, and the impact of economic downturns and economic uncertainty on the markets we serve (including as a result of current uncertainty due to inflation and increasing interest rates); (3) the impact of conditions in the global credit and commodity markets and their effect on construction spending and the economy in general; (4) trends in oil and natural gas which could adversely affect the demand for our services and products; (5) our inability to obtain equipment and other supplies for our business from our key suppliers on acceptable terms or at all, as a result of supply chain disruptions, insolvency, financial difficulties, supplier relationships or other factors; (6) increased maintenance and repair costs as our fleet ages and decreases in our equipment’s residual value; (7) risks related to a global pandemic and similar health concerns, such as the scope and duration of the outbreak, government actions and restrictive measures implemented in response to the pandemic, material delays and cancellations of construction or infrastructure projects, labor shortages, supply chain disruptions and other impacts to the business; (8) our indebtedness; (9) risks associated with the expansion of our business and any potential acquisitions we may make, including any related capital expenditures, or our ability to consummate such acquisitions; (10) our ability to integrate any businesses or assets we acquire; (11) competitive pressures; (12) security breaches, cybersecurity attacks, increased adoption of artificial intelligence technologies, failure to protect personal information, compliance with data protection laws and other disruptions in our information technology systems; (13) adverse weather events or natural disasters; (14) risks related to climate change and climate change regulation; (15) compliance with laws and regulations, including those relating to environmental matters, corporate governance matters and tax matters, as well as any future changes to such laws and regulations; and (16) other factors discussed in our public filings, including the risk factors included in the Company’s most recent Annual Report on Form 10-K. Investors, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we are under no obligation to publicly update or revise any forward-looking statements after the date of this release, whether as a result of any new information, future events or otherwise. These statements are based on the current beliefs and assumptions of H&E’s management, which in turn are based on currently available information and important, underlying assumptions. Investors, potential investors, security holders and other readers are urged to consider the above-mentioned factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240410996956/en/

Leslie S. Magee

Chief Financial Officer

225-298-5261

lmagee@he-equipment.com

Jeffrey L. Chastain

Vice President of Investor Relations

225-952-2308

jchastain@he-equipment.com

Source: H&E Equipment Services, Inc.

FAQ

What did H&E Equipment Services, Inc. (HEES) announce?

H&E announced the signing of a definitive agreement to acquire Lewistown Rental and its affiliated operations in Montana.

Where is Lewistown Rental based?

Lewistown Rental is based in Lewistown, Montana.

What is the estimated fleet value of the equipment acquired by H&E?

The total estimated fleet value of the equipment acquired by H&E is $28.5 million.

When is the transaction expected to close?

The transaction is expected to close in the second quarter of 2024.

How many locations will H&E have after the acquisition?

H&E's equipment rental operations will extend across 145 locations in 30 states after the acquisition.