FORT WAYNE, Ind., Dec. 3, 2020 /PRNewswire/ -- Nesco Holdings,
Inc. (NYSE: NSCO, "Nesco" or the "Company") today announced it has
entered into a definitive agreement to acquire Custom Truck One
Source ("CTOS") for a purchase price of $1.475 billion. Nesco and CTOS are leading
providers of specialized truck and heavy equipment solutions
including rental, sales and aftermarket parts and service.
The combination will create a leading, one-stop-shop provider of
specialty rental equipment serving highly attractive and growing
infrastructure end-markets, including transmission and distribution
("T&D"), the 5G revolution build-out and critical rail and
other national infrastructure initiatives. With complementary
business lines, customer bases and capabilities, the combination is
expected to yield significant benefits from increased scale,
breadth of product and service offerings and expanded geographic
coverage. Following closing, the combined company will have a more
attractive financial profile with significantly reduced leverage
and enhanced liquidity providing flexibility to address anticipated
demand in the large and growing addressable market in which it
operates.
In connection with the transaction, an affiliate of Platinum
Equity, LLC ("Platinum") has committed to invest over $850 million into Nesco in exchange for newly
issued common stock at a price of $5.00 per share. In addition, existing CTOS
shareholders, including certain funds managed by The Blackstone
Group, Inc. ("Blackstone"), in its capacity as the current majority
owner of CTOS, and certain members of the CTOS management team, are
expected to invest approximately $100
million into Nesco in exchange for newly issued common stock
also at the same price as Platinum. Energy Capital Partners ("ECP")
and Capitol Investment ("Capitol"), who together currently own ~70%
of Nesco's outstanding common stock, will retain their entire
ownership positions in Nesco and have entered into voting
agreements in support of the transaction. Subject to closing
mechanics and an additional equity investment of up to $200 million, upon closing, Platinum is expected
to own approximately 57% of Nesco's common stock, with existing
CTOS shareholders owning approximately 7%, ECP owning approximately
10% and Capitol owning approximately 3%. The additional equity
investment of up to $200 million is
targeted to be raised between signing and closing with a Platinum
backstop for $100 million.
There will be approximately 259 million shares outstanding at
closing assuming the full $200
million of additional equity is raised. The transaction is
anticipated to also be financed with a new $750 million ABL, of which approximately
$400 million will be drawn at
closing, and $900 million of high
yield notes. Pro forma net debt at closing is projected to be
approximately $1.3 billion.
"Since Capitol's investment in Nesco last year, our number one
strategic priority has been to find a way to bring these two
companies together, given the significant value inherent in the
combination. With enhanced scale, a broader set of capabilities and
vastly improved financial flexibility, we believe the new company
will be distinctively well-positioned to take advantage of the
anticipated growth in critical U.S. infrastructure efforts in
energy, telecom and rail over the near term and beyond," said
Mark Ein, Chairman & CEO of
Capitol and Vice Chairman of Nesco. "We are very pleased to partner
with Platinum given its deep knowledge and strong track record in
the equipment rental industry, as well as the existing CTOS
shareholders led by Blackstone. Together with Platinum and our
other co-investors and the combined company's Board and management
team, we look forward to capturing the meaningful upside
opportunities that lie ahead."
Platinum Equity was previously the majority owner of Nesco from
2011 to 2014, and has been a long-time, successful investor in a
wide range of specialty rental businesses.
"This is a powerful team of investors coming together to create
value," said Tom Gores, Chairman and
CEO of Platinum Equity. "We will deploy our industry knowledge and
global operating expertise to maximize the potential of this
investment."
"We know these companies and the industry extremely well and we
have a well-defined playbook for creating value in this space,"
said Louis Samson, Partner at
Platinum Equity. "We also have a deep bench of operations
professionals specialized in merger integration and business
transformation who will help bring Nesco and CTOS together,
building on the best attributes of each. We expect the combination
will create a compelling industrial growth company with strong
fundamentals and multiple ways to drive EBITDA organically or
through additional M&A."
"We are excited to bring together our complementary companies to
provide a full range of solutions to our customers," said
Fred Ross, Chief Executive Officer
of CTOS. "I want to thank our dedicated employees for all that they
do each day. Looking ahead, as a combined company, we will be very
well positioned to capitalize on a broad range of growth
opportunities and better serve our customers' specialty rental
equipment needs on a national basis. We look forward to working
together with the Nesco team to realize substantial synergies that
will create meaningful value for all our stakeholders."
John-Paul (JP) Munfa, Managing Director at Blackstone, added,
"We at Blackstone are proud to have played a role in the
establishment of CTOS, in partnership with Fred Ross and other CTOS shareholders, and have
seen the company more than double in size during our ownership. We
believe the additional scale and public market access provided by
the transaction are the next logical step in the company's
evolution, and we are pleased to invest in a transaction carrying
significant commercial benefits for the company's customers, in
partnership with Platinum, Capitol, ECP and Nesco's existing
shareholders."
"This combination will create new opportunities for our company,
our employees and the customers we serve," said Lee Jacobson, Chief Executive Officer of Nesco.
"Nesco and CTOS are a perfect fit and together will be well
positioned to pursue numerous opportunities in the rapidly growing
specialty rental segment. We couldn't have reached this milestone
without the hard work of our team, and we look forward to working
together with CTOS to ensure a seamless transition."
Strategic Combination Creates a Compelling Industrial Growth
Company
- Enhanced value proposition to customers through
"one-stop-shop" national platform. The combined company will
offer customers a full suite of solutions across the specialty
rental equipment value chain, including equipment rental, new
sales, used sales, aftermarket parts and service and retail parts,
tools and accessories. Together, the combined company will operate
on a national scale with over 1,800 employees, 46 company-operated
locations and a rental fleet that will be nearly double in size
with almost 9,000 units and more than $1.3
billion in combined original equipment cost ("OEC").
- Favorable exposure to highly attractive end-markets with
strong fundamentals. The combined company's core end-markets
will include T&D, telecom, rail and infrastructure, all of
which benefit from strong secular growth and macro mega trends, as
well as limited downside cyclicality. The combined company's
increased scale and national presence will provide significant
opportunities to further penetrate new and existing customers
across geographies and end-markets.
- Integrated platform with scale and differentiated
offerings. The combination will create a unique business model
that should drive a better customer experience and a significant
increase in the number and breadth of rental assets available. With
a substantially increased rental fleet, scale-enabled purchasing
benefits, maximum production and customization flexibility and a
well-established new and used sales business, the new company will
be better positioned to serve customers and win business.
- Significant anticipated cost synergies with additional
revenue upside opportunities. Nesco and CTOS expect to achieve
approximately $50 million in run-rate
annual cost synergies within two years of closing. Cost savings are
expected to be realized through back office consolidation,
procurement and SG&A efficiencies and service and production
optimization. The combined company also expects additional upside
opportunities from identified revenue synergies via expanded
service offerings and cross-selling opportunities and fleet
synergies.
- Compelling financial profile with strong momentum and ample
flexibility. The combined company expects to deliver pro forma
2020 adjusted EBITDA of approximately $337
million including run-rate cost synergies and pro forma 2021
adjusted EBITDA of $380 million to
$400 million including run-rate cost
synergies, as well as meaningful free cash flow as core end-market
activity continues to grow. At closing, the combined company
expects to benefit from more than $300
million in liquidity and a reduction in net leverage from
6.3x to 3.9x, based on last twelve months ended September 30, 2020 adjusted EBITDA, including
run-rate cost synergies.
Leadership and Headquarters
At closing, the Nesco Board of Directors will be reconstituted
such that Blackstone, ECP and Capitol each retain one board seat
and Platinum holds majority voting power of the Board. Together,
the parties will work to drive value for all shareholders.
Mr. Ross is expected to serve as CEO of the combined business.
The combined company will be headquartered at the CTOS campus in
Kansas City with significant
operations maintained in Indiana.
Additional details, including plans for integrating the respective
brands, will be addressed post close by a transition team
comprising representatives from each of the companies.
Approvals
The transaction has been unanimously approved by the Nesco Board
of Directors and is expected to close in the first quarter of 2021,
subject to shareholder approval and other customary conditions. ECP
and Capitol have entered into voting agreements in support of the
transaction.
Advisors
J.P. Morgan Securities LLC is serving as financial advisor to
Nesco and Latham & Watkins LLP is serving as legal counsel.
Citi is serving as financial advisor to CTOS and Kirkland &
Ellis LLP is serving as legal counsel.
Debt financing commitments have been obtained by Bank of
America, who will be leading the financing.
Hughes Hubbard & Reed LLP is serving as legal counsel to
Platinum.
Conference Call and Webcast
Representatives of Nesco, CTOS, Capitol and Platinum will host a
conference call today, December 3,
2020, at 8:30 a.m. ET to
discuss the transaction. The conference call can be accessed by
dialing +1 877-524-8416 (U.S. and Canada only) or +1 412-902-1028.
A live webcast of the conference call will be available on the
investor relations section of Nesco's website at
https://investors.nescospecialty.com/events-and-presentations/default.aspx#upcoming-events.
ABOUT NESCO
Nesco is one of the largest providers of specialty equipment,
parts, tools, accessories and services to the electric utility
transmission and distribution, telecommunications and rail markets
in North America. Nesco offers its
specialized equipment to a diverse customer base for the
maintenance, repair, upgrade and installation of critical
infrastructure assets including electric lines, telecommunications
networks and rail systems. Nesco's coast-to-coast rental fleet of
more than 4,000 units includes aerial devices, boom trucks, cranes,
digger derricks, pressure drills, stringing gear, hi-rail
equipment, repair parts, tools and accessories. For more
information, please visit investors.nescospecialty.com.
ABOUT CUSTOM TRUCK ONE SOURCE
CTOS is a leading provider of specialized truck and heavy
equipment solutions to the utility, telecommunications, rail and
infrastructure markets in North
America. CTOS solutions include rentals, sales, aftermarket
parts and service, equipment production, manufacturing, financing
solutions, and asset disposal. With vast equipment breadth, CTOS'
team of experts service its customers across an integrated network
of 26 locations across North
America. For more information, please visit
www.customtruck.com.
Additional Information About the Acquisition and Where to
Find It
This communication is being made in respect of the proposed
acquisition of CTOS by Nesco. A special meeting of the stockholders
of Nesco will be announced as promptly as practicable to seek
stockholder approval in connection with the proposed acquisition. Nesco expects to file with the
Securities and Exchange Commission ("SEC") a proxy statement and
other relevant documents in connection with the proposed
acquisition. The definitive proxy statement will be sent or given
to the stockholders of Nesco and will contain important information
about the proposed transaction and related matters. INVESTORS AND
STOCKHOLDERS OF NESCO ARE URGED TO READ THE DEFINITIVE PROXY
STATEMENT AND OTHER RELEVANT MATERIALS CAREFULLY AND IN THEIR
ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT NESCO, CTOS AND THE ACQUISITION. Investors may
obtain a free copy of these materials (when they are available) and
other documents filed by Nesco with the SEC at the SEC's website at
www.sec.gov, at Nesco's website at www.nescospecialty.com or by
sending a written request to Nesco Holdings, Inc., 6714 Pointe
Inverness Way, Suite 220, Fort Wayne,
Indiana 46804, Attention: Chief Financial Officer and
Secretary.
Participants in the Solicitation
Nesco and its directors, executive officers and certain other
members of management and employees may be deemed to be
participants in soliciting proxies from its stockholders in
connection with the acquisition. Information regarding the
persons who may, under the rules of the SEC, be considered to be
participants in the solicitation of Nesco's stockholders in
connection with the acquisition will be set forth in Nesco's
definitive proxy statement for its special stockholder meeting.
Additional information regarding these individuals and any direct
or indirect interests they may have in the acquisition will be set
forth in the definitive proxy statement when it is filed with the
SEC in connection with the acquisition. You can find information
about Nesco's directors and executive officers in Nesco's filings
with the SEC, including Nesco's definitive proxy statement for its
2020 Annual Meeting of Stockholders, which was filed with the SEC
on May 1, 2020.
Forward-Looking Statements
Certain statements contained in this communication may be
considered forward-looking statements within the meaning of U.S.
securities laws, including section 21E of the Securities Exchange
Act of 1934, as amended, including statements regarding the
proposed transaction and the ability to consummate the proposed
transaction. When used in this communication, the words
"potential," "estimates," "projected," "expects," "anticipates,"
"forecasts," "plans," "intends," "believes," "seeks," "may,"
"will," "should," "future," "propose" and variations of these words
or similar expressions (or the negative versions of such words or
expressions) are intended to identify forward-looking statements.
These forward-looking statements are not guarantees of future
performance, conditions or results, and involve a number of known
and unknown risks, uncertainties, assumptions and other important
factors, many of which are outside Nesco's control, that could
cause actual results or outcomes to differ materially from those
discussed in the forward-looking statements. Important factors,
among others, that may affect actual results or outcomes include:
the ability to consummate the acquisition of CTOS and to integrate
the acquisition into the Nesco business; failure to obtain
necessary stockholder and regulatory approvals or to satisfy any of
the other conditions related to the acquisition of CTOS; the
ability to realize expected synergies and the timing for any such
realization; projected financial results for Nesco and CTOS,
including on a combined basis; potential litigation associated with
the acquisition of CTOS; the potential impact of the announcement
of the acquisition of CTOS on Nesco's or CTOS's relationships,
including with suppliers, customers, employees and regulators; the
impact of the COVID-19 pandemic on Nesco's or CTOS's business
operations, as well as the overall economy; Nesco's ability to
execute on its plans to develop and market new products and the
timing of these development programs; Nesco's estimates of the size
of the markets for its solutions; the rate and degree of market
acceptance of Nesco's solutions; the success of other competing
technologies that may become available; Nesco's ability to identify
and integrate acquisitions, including the acquisition of truck
utilities; the performance and security of Nesco's services;
potential litigation involving Nesco; and general economic and
market conditions impacting demand for Nesco's services. For a more
complete description of these and other possible risks and
uncertainties, please refer to Nesco's annual report on form 10-K
filed with the securities and exchange commission on March 13, 2020 and quarterly report on form 10-Q
filed with the securities and exchange commission on May 7, 2020, as well as to Nesco's subsequent
filings with the SEC. Should one or more of these material risks
occur, or should the underlying assumptions change or prove
incorrect, Nesco's actual results, performance, achievements or
plans could differ materially from those expressed or implied in
any forward-looking statement. The forward-looking statements
contained herein speak only as of the date hereof, and Nesco
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
NESCO INVESTOR CONTACT
Josh Boone, CFO
(800) 252-0043
investors@nescospecialty.com
PLATINUM INVESTOR CONTACT
Dan Whelan
Principal, Platinum Equity
dwhelan@platinumequity.com
MEDIA CONTACT
Joele Frank, Wilkinson Brimmer
Katcher
Jim Golden / Tim Lynch
212-355-4449
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SOURCE Nesco Holdings, Inc.