M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Wednesday, November 14, 2007

URI: The Naked Power of the Reverse Termination Fee

The press release below says it all.  I'll have commentary later tonight and how the reverse termination fee of $100 million put United Rentals in this mess.  As someone just said to me, I should "rent an apartment in Delaware." 

United Rentals Says Cerberus Repudiates Merger Agreement Wednesday November 14, 3:43 pm ET -- Cerberus Admits No Material Adverse Change Has Occurred

United Rentals, Inc. (NYSE: URI - News) announced today that Cerberus Capital Management, L.P. informed it that Cerberus is not prepared to proceed with the purchase of United Rentals on the terms set forth in its merger agreement, dated July 22, 2007. Under that agreement, Cerberus agreed to acquire United Rentals for $34.50 per share in cash, in a transaction valued at approximately $7.0 billion.

The Company noted that Cerberus has specifically confirmed that there has not been a material adverse change at United Rentals. United Rentals views this repudiation by Cerberus as unwarranted and incompatible with the covenants of the merger agreement. Having fulfilled all the closing conditions under the merger agreement, United Rentals is prepared to complete the transaction promptly. The Company also pointed out that Cerberus has received binding commitment letters from its banks to provide financing for the transaction through required bridge facilities. The Company currently believes that Cerberus’ banks stand ready to fulfill their contractual obligations.

United Rentals also said that its business continues to perform well, as evidenced by its strong third quarter results, which included record EBITDA. In addition, the Company believes that the revised strategic plan it began initiating at the beginning of the third quarter, which includes a refocus on its core rental business, improved fleet management and significant cost reductions, is providing the foundation to maintain its performance.

United Rentals has retained the law firm of Orans, Elsen & Lupert LLP to represent it in connection with considering all of its legal remedies in this matter. The Company intends to file a current report on Form 8-K shortly, which will attach correspondence received by the Company from Cerberus.


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