v3.25.2
Business Combinations
 6 Months Ended
Jun. 30, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Business Combinations Business Combinations
The Company accounts for business combinations using the acquisition method as defined in ASC Topic 805, Business Combinations ("Topic 805"). Under this method of accounting, the purchase price allocations below reflect the estimated fair values, net of tax, of the respective assets acquired and liabilities assumed.

2025 Business Combinations

On June 2, 2025, the Company completed the acquisition of H&E Equipment Services, Inc. ("H&E") pursuant to the Agreement and Plan of Merger, dated as of February 19, 2025 (the "Merger Agreement"). H&E was a full-service equipment rental company that provided its customers with a mix of high-quality general rental fleet including aerial work platforms, earthmoving equipment, material handling equipment, and other lines of equipment. H&E served a diverse mix of customers across both construction and industrial markets through its network of approximately 160 branches in over 30 U.S. states. The acquisition is expected to (i) add scale and density in key rental regions, particularly in several of the largest rental regions in North America; (ii) create cross-sell opportunities of specialty equipment to an expanded customer base and (iii) increase availability of aerial, material handling and earthmoving equipment for the Company's customers.

The Company acquired all of the outstanding common shares of H&E in exchange for $78.75 in cash and 0.1287 shares of Company common stock on a per-H&E share basis. The total purchase price for the acquisition was $4.8 billion including cash payment of $2.9 billion and the issuance of approximately 4.7 million of the Company's common shares to H&E's shareholders, valued at $584 million. Additionally, the Company paid cash to extinguish $1.4 billion of outstanding H&E debt that was not assumed as part of the acquisition. The acquisition was funded by issuance of new debt consisting of $2.8 billion in senior unsecured notes, a $750 million term loan facility and $2.5 billion of borrowings on a new asset based revolving credit facility, of which approximately $1.6 billion was used to repay borrowings on the prior asset based revolving credit facility. See Note 15, "Equity and Earnings (Loss) Per Share and Note 9, "Debt" for additional information on the equity issued and financing associated with the H&E acquisition, respectively.

The following table summarizes the purchase price allocation of the assets acquired and liabilities assumed (in millions):

H&E
Cash$23 
Accounts receivable209 
Other current assets13 
Rental equipment1,830 
Property and equipment286 
Right-of-use lease assets567 
Customer relationships intangible1,070 
Total identifiable assets acquired3,998 
Current liabilities172 
Operating lease liabilities567
Finance lease liabilities7
Deferred tax liabilities633 
Net identifiable assets acquired2,619 
Goodwill2,211 
Net assets acquired$4,830 

The acquired intangible assets in this acquisition were customer relationships that have an expected life of 10 years. The level of goodwill that resulted from the acquisition is primarily reflective of operational synergies the Company expects to achieve that are not associated with identifiable assets, the value of H&E's assembled workforce and new customer relationships expected to arise from the acquisition. The goodwill is not expected to be deductible for income tax purposes.
Certain estimated fair values for the acquisition, including goodwill, intangible assets, right-of-use lease assets, lease liabilities and income taxes, are not yet finalized. The purchase price was preliminarily allocated based on information available at the acquisition date and is subject to change as we complete our analysis of the fair values at the date of the acquisition during the measurement period not to exceed one year as permitted under Topic 805.

The assets and liabilities for H&E were recorded as of June 2, 2025 and the results of operations have been included in the Company's consolidated results of operations since that date. Total revenues included in the condensed consolidated statement of operations since the acquisition date were $100 million. It is not practicable to reasonably estimate the amount of earnings of H&E since acquisition date, primarily due to our corporate structure and the allocation of corporate costs.

The Company has incurred $144 million of transaction expenses during the six months ended June 30, 2025, associated with the acquisition of H&E. Expenses incurred primarily consisted of the one-time termination fee paid on behalf of H&E of $64 million, advisory fees of $27 million, commitment fees related to the Bridge Facility (as defined in Note 9, "Debt") of $21 million and various other financial consulting and legal fees.

2024 Business Combinations

On July 16, 2024, the Company completed the acquisition of substantially all of the assets of Otay Mesa Sales ("Otay"). Otay was a full-service general equipment rental company comprised of approximately 135 employees and four locations serving construction and industrial customers throughout the metropolitan areas of San Diego, California and Phoenix and Yuma, Arizona. The aggregate consideration for the acquisition was approximately $273 million. The acquisition and related fees and expenses were funded through available cash and drawings on the senior secured asset-based revolving credit facility.

The following table summarizes the purchase price allocation of the assets acquired and liabilities assumed (in millions) since the acquisition date on July 16, 2024. The excess of consideration paid over the estimated fair value of the net identifiable assets acquired was initially recorded at $56 million, however, in accordance with Topic 805, the Company recorded a measurement period adjustment and increased goodwill by $11 million during the first quarter of 2025. The adjustment was primarily related to additional information obtained regarding the valuation of rental equipment as of the acquisition date.
Otay
Accounts receivable$14 
Rental equipment120 
Property and equipment8 
Intangibles(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 
Total identifiable assets acquired207 
Current liabilities1 
Net identifiable assets acquired206 
Goodwill(b)
67 
Net assets acquired$273 

(a) The following table reflects the fair values and useful lives of the acquired intangible assets identified (in millions):
OtayLife (years)
Customer relationships$61 14
Non-compete agreements4 5
Total acquired intangible assets$65 

(b) The level of goodwill that resulted from the acquisition is primarily reflective of operational synergies that the Company expects to achieve that are not associated with identifiable assets, the value of Otay's assembled workforce and new customer relationships expected to arise from the acquisition. All of the goodwill is expected to be deductible for income tax purposes.
Pro Forma Supplementary Data

The unaudited pro forma supplementary data presented in the table below (in millions) gives effect to the acquisitions of H&E and Otay as if they had been included in the Company's condensed consolidated results for the entire period reflected. The unaudited pro forma supplementary data is provided for informational purposes only and is not indicative of the Company's results of operations had the acquisitions been included for the period presented, nor is it indicative of the Company's future results.
Three Months Ended June 30, 2025
HercH&ETotal
Historic/pro forma equipment rental revenues$870 $181 $1,051 
Historic/pro forma total revenues1,002 217 1,219 
Historic/combined pretax loss(46)(36)(82)
Pro forma adjustments to consolidated pretax loss:
Impact of fair value adjustments/useful life changes on depreciation(a)
12 12 
Intangible asset amortization(b)
(18)(18)
Interest expense(c)
(41)(41)
Elimination of historic interest(d)
10 10 
Transaction expenses(e)
112 112 
Pro forma pretax loss$(7)

Six Months Ended June 30, 2025
HercH&ETotal
Historic/pro forma equipment rental revenue$1,609 $455 $2,064 
Historic/pro forma total revenues1,863 536 2,399 
Historic/combined pretax loss(54)(44)(98)
Pro forma adjustments to consolidated pretax loss:
Impact of fair value adjustments/useful life changes on depreciation(a)
33 33 
Intangible asset amortization(b)
(45)(45)
Interest expense(c)
(104)(104)
Elimination of historic interest(d)
26 26 
Transaction expenses(e)
195 195 
Pro forma pretax income$7 
Three Months Ended June 30, 2024
Herc
Otay
H&ETotal
Historic/pro forma equipment rental revenue$765 $19 $312 $1,096 
Historic/pro forma total revenues848 20 377 1,245 
Historic/combined pretax income93 1 45 139 
Pro forma adjustments to consolidated pretax income:
Impact of fair value adjustments/useful life changes on depreciation(a)
1 18 19 
Intangible asset amortization(b)
(3)(27)(30)
Interest expense(c)
(4)(76)(80)
Elimination of historic interest(d)
2 18 20 
Transaction expenses(e)
1 — 1 
Pro forma pretax income$69 

Six Months Ended June 30, 2024
Herc
Otay
H&ETotal
Historic/pro forma equipment rental revenue$1,484 $36 $608 $2,128 
Historic/pro forma total revenues1,652 38 748 2,438 
Historic/combined pretax income174 3 81 258 
Pro forma adjustments to consolidated pretax income:
Impact of fair value adjustments/useful life changes on depreciation(a)
3 35 38 
Intangible asset amortization(b)
(5)(54)(59)
Interest expense(c)
(9)(154)(163)
Elimination of historic interest(d)
3 36 39 
Transaction expenses(e)
1 (47)(46)
Pro forma pretax income$67 

(a) Depreciation of rental equipment was adjusted for the fair value at acquisition and changes in useful lives of equipment acquired.
(b) Intangible asset amortization was adjusted to include amortization of the acquired intangible assets.
(c) As discussed above, the Company funded in part the Otay and H&E acquisitions with borrowings under various long-term debt instruments. Interest expense was adjusted to reflect interest on such borrowings.
(d) Historic interest on debt that is not part of the combined entity was eliminated.
(e) Transaction expenses associated with the Otay and H&E acquisitions that were contingent upon closing, whether incurred by the Company or the acquiree, were assumed to have been recognized as of the beginning of the earliest period disclosed. Non-contingent transaction expenses were assumed to have been recognized prior to the earliest period presented and were excluded from the periods presented.