November 19, 2007
URI Sues (Finally)
Here it is, finally. I'll have more on it later (but for now see my post from last week -- this is unfolding as I predicted and URI's claims at this point are not surprising -- they are clearly relying on the unavailability of financing to escape their obligations).
GREENWICH, Conn.--(BUSINESS WIRE)--November 19, 2007 United Rentals, Inc. (NYSE: URI) announced today that it has filed a lawsuit against RAM Holdings, Inc. and RAM Acquisition Corp. (collectively, "RAM"), acquisition vehicles formed by Stephen A. Feinberg's Cerberus Capital Management, L.P. to acquire United Rentals. The lawsuit, filed in the Delaware Court of Chancery, seeks to compel the Cerberus acquisition vehicles to complete the agreed-upon transaction.
As previously announced, United Rentals received a letter from RAM, repudiating the merger agreement even though there has been no material adverse change in United Rentals' business. The letter was sent after a meeting led by Mr. Feinberg at which RAM informed United Rentals' advisors that RAM did not want to force its financing sources to fulfill their commitments, even though the merger agreement requires them to do so. At the meeting, Cerberus specifically confirmed that there has not been a material adverse change. United Rentals believes that the repudiation, which is unwarranted and incompatible with the covenants of the merger agreement, is nothing more than a naked ploy to extract a lower price at the expense of United Rentals' shareholders.
The lawsuit asserts that the "Specific Performance" provision of the merger agreement, which states that "irreparable damage would occur in the event that any of the provisions of th(e) Agreement were not performed in accordance with their specific terms or were otherwise breached," explicitly gives United Rentals the right to compel consummation of the merger in the present situation. The lawsuit contends that the Cerberus acquisition vehicles are directly violating the merger agreement and acting in bad faith, and do not have the right to pay a reverse break-up fee and simply walk away. There is no financing barrier to completing the merger, as RAM has binding commitment letters from its financing sources to provide financing for the transaction. United Rentals believes that the financing sources stand ready to fulfill their contractual obligations.
As described in the lawsuit, the Specific Performance provision of the merger agreement requires RAM to draw down the committed financing and consummate the merger under precisely these circumstances. The lawsuit also contends that the Cerberus acquisition vehicles sought to further their scheme to buy United Rentals for less bytaking advantage of the dramatic stock price drop that occurred after their intention to walk away from their obligation to consummate the merger was leaked to a news organization. The lawsuit asks the Court to award United Rentals specific performance of the merger agreement to consummate the merger in accordance with its terms.
The United Rentals Board believes it is in the best interest of the Company and its stockholders to bring this action to enforce their contractual rights, and looks forward to prevailing in court.
The New York law firm of Orans, Elsen & Lupert LLP and the Wilmington, Delaware law firm of Rosenthal, Monhait & Goddess, P.A. is representing United Rentals in this litigation.
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