H&E Equipment Services Inc., based in Baton Rouge, is selling its ailing crane business for 130 million US dollars in cash, making it an important step on the way to becoming a pure heavy equipment rental company.
As demand from customers in the oil and gas industry has subsided, H & E’s crane rentals and sales have also decreased, the records show.
Overall demand for equipment rentals has proven to be more stable and resilient to market disruption than the distribution business, the company said. The H&E equipment rental business has shown steady growth, with an average annual growth rate of 11% for the five years to 2020. The rental share of the H&E business increased from 32% of sales 10 years ago to 51% in 2020.
A subsidiary of Wisconsin-based crane maker The Manitowoc Co. Inc. is expected to take over H & E’s crane rental and sales business for more than the original value of the cranes themselves, which US Securities said was worth $ 73.5 million for 183 Has cranes and stock exchange commission records.
Manitowoc expects to fund the transaction, which will include 11 full-service stores across the country, with cash and debt. H&E Equipment called itself the largest distributor of Manitowoc crane equipment.
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The deal is expected to close by the end of 2021, when regulatory approvals, including federal antitrust laws related to the Hart-Scott-Rodino Act, are granted.
“The effects of the COVID-19 outbreak have reduced demand for oil and gas prices as companies and other organizations suspended or restricted travel,” H & E’s disclosure records read. “Although global crude oil and natural gas prices have partially recovered from the decline seen in the first quarter of 2020, we believe that uncertainty about future oil and natural gas prices continues to influence customer investment decisions.”
In some situations, customers have “canceled large capital purchases due to the uncertainty surrounding the COVID-19 pandemic”. For example, sales of new cranes decreased by $ 53.4 million in 2020.
The company expects to spend its cash on expansion, investments in its existing rental portfolio and technology.
“We anticipate that our continued move towards higher margin rentals will fuel our strategic focus on geographic expansion and fleet investments,” said Brad Barber, CEO of H&E Equipment, in a press release.