SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
CONSENT STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE
ACT OF 1934
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RENTAL SERVICE CORPORATION
(Name of Registrant as Specified in Its Charter)
UNITED RENTALS, INC.
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Presentation
to
Rental Service Corporation Stockholders
May 1999
Forward-Looking Statements
Certain statements contained in this presentation are forward-looking in
nature. These statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should," or
"anticipates" or the negative thereof or comparable terminology, or by
discussions of strategy. You are cautioned that our business and
operations are subject to a variety of risks and uncertainties and,
consequently, our actual results may materially differ from those projected
by any forward-looking statements. Factors that could cause our actual
results to differ from those projected include, but are not limited to, the
following: (1) a downturn in construction and industrial activity could
lead to a decrease in demand for our equipment, (2) the prices we are
required to pay for acquisitions could increase, (3) the cost or difficulty
of integrating the businesses that we acquire may be greater than expected,
(4) we may not realize expected cost savings, synergies, revenues and
earnings from our acquisitions, including our proposed transaction with
Rental Service Corporation, (5) we cannot be certain that we will always
have access to the additional capital that we may require for our growth
strategy or that our cost of capital will not increase, (6) companies that
we acquire could have undiscovered liabilities and (7) we are highly
dependent on the services of our senior management. These risks and
uncertainties, as well as others, are discussed in greater detail in our
SEC filings, including our most recent Report on Form 10-K . We make no
commitment to revise or update any forward-looking statements in order to
reflect events or circumstances after the date any such statement is made.
Background
12/98 United Rentals approached Rental Service to discuss a potential
business combination.
1/15/99 Rental Service management told United Rentals that Rental Service
is not for sale.
1/21/99 Six days later, Rental Service announced a no premium so-called
merger of equals with NationsRent. Rental Service erected
significant barriers around its transaction with NationsRent by
agreeing to an exorbitant $40 million break-up fee, an unusual
cross-option arrangement, and other entrenchment mechanisms.
3/99 Rental Service contemplated terminating the NationsRent merger
agreement by seeking a declaratory judgment that the merger
agreement had been materially breached by NationsRent.
Background
4/1/99 Rental Service stock declined by 26% per share since the
NationsRent agreement was announced on January 21, to $17.25 per
share on the last trading day prior to the announcement of the
United Rentals tender offer.
4/5/99 United Rentals offered Rental Service stockholders $22.75 per
share in cash - a 32% premium over the last closing price.
4/5/99 United Rentals filed suit to invalidate certain restrictive
aspects of the proposed NationsRent/Rental Service transaction,
as well as the merger agreement itself.
4/8/99 Ten weeks after signing the merger agreement, and only after
United Rentals filed its lawsuit, Rental Service publicly filed
the NationsRent merger agreement.
4/16/99 Rental Service's Board rejected United Rentals' premium cash
offer and adopted a poison pill in a further effort to prevent
United Rentals from successfully completing its tender offer.
Background
4/16/99 Rental Service announced Q1 earnings that included unusually high
used equipment sales.
4/16/99 Rental Service announced that its Chairman and CEO has taken a
leave of absence.
5/7/99 NationsRent announced Q1 earnings that were lower than consensus
estimates.
5/7/99 Rental Service announced it is renegotiating its deal with
NationsRent, while still refusing to talk with United Rentals.
5/13/99 United Rentals began to solicit written consents to remove the
Rental Service Board.
Today Rental Service continues to refuse to talk with United Rentals.
The United Rentals Offer is Superior
to the Proposed NationsRent Transaction
Our $22.75 offer provides:
- A 45% premium to Rental Service's closing price of $15.69 on December
31, 1998.
- A 32% premium to Rental Service's closing price of $17.25 on the last
trading day prior to our tender offer.
- A 28% premium to the 30-day average closing price of $17.78 prior to
the announcement of our offer.
- The certainty of cash compared to the uncertain future of a combined
company controlled by NationsRent's board and management.
Rental Service's Flawed Financial Analysis
We believe:
- Rental Service's financial projections are inflated.
- The projections unrealistically assume an EBITDA margin of 38.8%
in 1999 and 38.9% in 2000 versus the actual reported margin of
36.2% in 1998, adding approximately $20 million of EBITDA in 1999
and approximately $26 million of EBITDA in 2000.
- The projections assume 30 cold starts per year, although only
four were completed so far this year.
- The Rental Service projections for 1999-2003 result in a cash
flow deficit of approximately $750 million.
- Rental Service's multiple and premium analysis mischaracterizes the
United Rentals offer.
- Public market trading multiples are now less than half of what
they were at the time of the United Rentals/U.S. Rentals and Atlas
Copco/Prime transactions.
- United Rentals' offer to Rental Service stockholders is at a 32%
market premium -- the U.S. Rentals market premium was only 6% and
the Prime market premium was 29%.
Rental Service's Flawed Financial Analysis
- Rental Service greatly exaggerated the potential accretion to United
Rentals.
- Rosy earnings projections that are much higher than Street
estimates account for the majority of the $0.20 per share
discrepancy between the United Rentals and Rental Service
accretion estimates.
- Rental Service also ignored the impact of the necessary future
issuance of equity to maintain our targeted debt-to-capitalization
ratio.
Accretion Analysis
At $22.75 per share we expect $0.10 of EPS accretion,
not the $0.30 per share claimed by Rental Service.
(in millions)
except per share data
RSV 1999E Pre-tax Income (a) 68.0
Less: Transaction Goodwill Amortization (5.4)
Less: Incremental Interest Expenses and
Financing Fee Amortization (59.4)
Add: Synergies 20.0
Incremental Pre-tax Income 23.2
Less: Taxes (13.1)
Incremental Net Income $10.1
Per Share Impact $0.10
__________
(a) Based on consensus Street estimates.
Note: Calculation is pro forma for full year 1999.
The NationsRent/Rental Service Proposal
is NOT a "Merger of Equals"
Rental Service stockholders would receive no premium
NationsRent stockholders would receive a 26% premium AND control
o The proposed exchange ratio of 0.355 Rental Service shares for each
NationsRent share represented a 26% premium to NationsRent's share price
of $6.56 on the day prior to the deal announcement.
o NationsRent would name five of the nine directors on the combined board.
o NationsRent insiders and affiliates of H. Wayne Huizenga would control
about 25% of the combined company's stock; Rental Service executive
officers and directors would own approximately 3%.
o NationsRent's CEO is slated to become the CEO of the new company.
o The combined company would be called "RSC NationsRent," and its name
would be changed to "NationsRent" within 12 months.
Why You Should Remove the Rental Service Board
o The Board agreed to an unusually high $40 million "break up" payment if
the NationsRent merger is not completed more than twice the average
percentage. The fee gets paid even if Rental Service stockholders vote
the deal down.
o The Rental Service Board approved an unusual option agreement that could
make pooling-of-interests accounting impossible for any alternative
deal.
o Rather than entering into discussions with United Rentals, the Rental
Service Board adopted a poison pill to block our tender offer.
o The Rental Service Board tailored the NationsRent merger agreement to
ensure that management would receive excessive "change of control"
compensation.
o The Rental Service Board has to this day failed to disclose to its
stockholders that in March 1999 it contemplated terminating the
NationsRent merger agreement by seeking a declaratory judgment that the
merger agreement had been materially breached by NationsRent.
o A majority of the Rental Service Board are not independent.
Action Points
Tender Offer
o Send a strong message to the Rental Service Board to maximize
stockholder value: tender your shares into our $22.75 premium cash offer
by May 27, 1999.
Consent Solicitation (Blue Card)
o Remove the Rental Service Board.
o Elect truly independent nominees who will diligently exercise their
fiduciary duty to maximize stockholder value and who will seriously
consider our $22.75 cash offer or any superior offer.
Summary
o United Rentals has offered $22.75 per share in cash -- a 32% premium.
o The Rental Service Board has not fulfilled its fiduciary duties:
- It recommended paying a premium to NationsRent, yet giving up control.
- It has failed to disclose material information to stockholders.
- It "plays favorites" with NationsRent by refusing to enter into
discussions with United Rentals and erecting barriers against our
offer.
o Rental Service stockholders should:
- Tender their shares to United Rentals.
- Replace the Rental Service Board with a slate of truly
independent nominees.
Certain Information Concerning Participants
United Rentals, Inc. ("United Rentals"), UR Acquisition Corporation
("UR Acquisition") and the following persons named below may be deemed to
be "participants" in the solicitation of proxies from stockholders of
Rental Service Corporation ("Rental Service") in opposition to the proposed
merger with NationsRent: the directors of United Rentals (Bradley Jacobs
(Chairman of the Board and Chief Executive Officer), Wayland Hicks (Vice
Chairman and Chief Operating Officer), John Milne (Vice Chairman, Chief
Acquisition Officer and Secretary), William Berry (President), John
McKinney (Vice President, Finance), Leon Black, Richard Colburn, Ronald
DeFeo, Michael Gross, Richard Heckmann, Gerald Tsai, Jr. and Christian
Weyer); the following executive officers and employees of United Rentals:
Michael Nolan (Chief Financial Officer) and Robert Miner (Vice President,
Strategic Planning); and the nominees of United Rentals (the "Nominees") to
stand for election to the Board of Directors of Rental Service (Messrs.
Richard Daniel, Raymond Troubh, William Aaron, David Bronner, Peter Gold,
David Katz, Elliot Levine and Jeffrey Parker and Ms. Stephanie Joseph).
As of the date hereof, United Rentals is the beneficial owner of 100
shares of common stock, par value $0.01 per share (the "Common Stock"), of
Rental Service. Other than set forth herein, as of the date hereof,
neither United Rentals, UR Acquisition nor any of the persons listed above,
has any interest, direct or indirect, by security holding or otherwise, in
Rental Service.
United Rentals has retained Goldman, Sachs & Co. ("Goldman Sachs") to
act as its financial advisor and the Dealer Managers in connection with the
tender offer (the "Offer") by United Rentals and UR Acquisition to purchase
the shares of Common Stock of Rental Service for $22.75 per share in cash,
for which Goldman Sachs may receive substantial fees, as well as
reimbursement of reasonable out-of-pocket expenses. In addition, United
Rentals has agreed to indemnify Goldman Sachs and certain related persons
against certain liabilities, including certain liabilities under the
federal securities laws, arising out of its engagement. United Rentals has
also entered into a commitment letter with Goldman Sachs Credit Partners
L.P. ("GSCP") relating to the financing of the Offer pursuant to which GSCP
may receive substantial fees, as well as reimbursement of reasonable out-
of-pocket expenses. Goldman Sachs does not admit that it or any of its
partners, directors, officers, employees, affiliates or controlling
persons, if any, is a "participant" as defined in Schedule 14A promulgated
under the Securities Exchange Act of 1934, as amended, in the solicitation
of proxies and/or consents, or that Schedule 14A requires the disclosure of
certain information concerning Goldman Sachs. In connection with Goldman
Sachs' role as financial advisor to United Rentals, the following
investment banking employees of Goldman Sachs may communicate in person, by
telephone or otherwise with a limited number of institutions, brokers or
other persons who are stockholders of Rental Service and may solicit
proxies from these institutions, brokers or other persons: Naeemah Clark,
Bruce Evans, Lucien Farrell, David Herman, Robert Lipman, Jeffrey Moslow,
Cody Smith and Lawrence Steyn. Goldman Sachs engages in a full range of
investment banking, securities trading, market-making and brokerage
services for institutional and individual clients. In the normal course of
its business Goldman Sachs may trade securities of Rental Service for its
own account and the accounts of its customers, and accordingly, may at any
time hold a long or short position in such securities. Goldman Sachs has
informed United Rentals that, as of the date hereof, Goldman Sachs holds no
shares of the Common Stock of Rental Service for its own account. Goldman
Sachs and certain of its affiliates may have voting and dispositive power
with respect to certain shares of Rental Service Common Stock held in asset
management, brokerage and other accounts. Goldman Sachs and such
affiliates disclaim beneficial ownership of such shares of Rental Service
Common Stock.
