Monday, December 17, 2007

United Rentals to get bought?

It sure looks like it to me. United Rentals (URI 23.55) had a $34.50 buy out offer scuttled when Cerberus simply just walked away, hoping to just to pay $100 million break up fee.

URI wanted none of that, and took them to court.

Cerberus said that URI's "sole and exclusive" remedy was $100 million if the agreement was breached. That's not what the contract said. The termination fee was URI's "sole and exclusive" remedy if URI terminated the agreement. They didn't. That's what the contract said. It also said that URI was entitled to specific performance. Which means they can compel Cerberus to buy them, at the agreed price.

Cerberus' defense? A scribbled piece of paper, by Cerberus (ie: a hand written note outside of the contract) that says URI's remedy was just $100 million. So Cerberus, scribbles a note, and presents this as "remarkable evidence." It was unremarkable.

URI had already stated they would be "crazy" to present a proposal by Cerberus, to buy the company to the board, if $100 million was just an "option." What does this mean? URI was simply stating, pre-agreement, what Cerberus now wants. I'll give it to you in Wall Street language. No proposal would be presented to the board, if it was just a $100 million "call option"on the company. In other words, if things look good, Cerberus buys you at $34.50. If they are not, they walk away. None of that language was in the merger agreement. That's why URI agreed to the Cerberus proposal. So Cerberus finds a hand written note, outside of the agreement and presents that as evidence.

Remarkable isn't it?

Now URI was denied an "expedited judgement" but it was "exceedingly close." So said presiding court chancellor William Chandler. So the trial gets postponed for one day. Which means Cerberus needs to renegotiate their deal with URI, and for it to be rather close to the original terms. And if the price isn't "exceedingly close" a deal gets done, now.

My interpretation? The deal gets done above $31. And we have an anouncement tomorrow.


Anonymous said...

So the deal didn't get done !
And who can be interested now that
money suddenly got tight ?
Like your comments.

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