The company won’t be acquired after all.
In its 45-year history, McGrath RentCorp (MGRC -3.13%) has had many encouraging pieces of news to report to its shareholders and the world at large. Unfortunately for the business-to-business equipment rental specialist, its top news item on Wednesday wasn’t so positive. On the back of that, investors traded out of the stock to leave it with an over 3% decline in price. This was a more pronounced slide than the 0.3% dip of the S&P 500 index on the day.
Merger deal terminated
McGrath announced that it and peer WillScot Holdings (WSC -2.54%) have mutually agreed to cancel their planned merger. Per the terms of the two companies’ merger agreement, McGrath is to receive a termination fee of $180 million from WillScot.
The pair originally announced the tie-up in January. Under the terms of their deal, WillScot was to acquire McGrath for $3.8 billion in cash and stock, with the former comprising 60% of the purchase and the latter the remainder. That amount represented a premium of 10% over McGrath’s share price on the trading day prior to the announcement.
However, since McGrath and WillScot operate in similar segments and are major players in their niches, the deal attracted scrutiny from the Federal Trade Commission (FTC). Soon after the announcement, the government agency submitted requests for information from the two companies in order to gauge whether the merger would be anti-competitive.
Steady as it goes
In its press release on the merger’s termination, McGrath pledged that its “strategic focus on our modular and portable storage growth opportunities will continue.” But the company’s investors, happy with the share price bump the original announcement provided, would surely rather have seen the deal be consummated than hear promises of a business-as-usual strategy.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends McGrath RentCorp. The Motley Fool has a disclosure policy.
