United Rentals Inc. on Monday said it had brought suit against RAM Holdings Inc. and RAM Acquisition Corp., the acquisition vehicles established by Cerberus Capital Management LP, to go through with their planned $6.6 billion take-private of the equipment rental company.
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The suit is in response to RAM's repudiating the merger agreement last week, even though there had been no material adverse change to the Greenwich, Conn., target's business. In a statement Monday, the company called the repudiation "a naked ploy to extract a lower price at the expense of United Rentals’ shareholders."
In a Nov. 15 story, The Deal's Scott Stuart wrote: "Cerberus' RAM Holdings Inc. is liable to United Rentals for a $100 million termination fee. The key question is what, if any, exposure RAM and Cerberus have beyond that." Further, he said: "According to several sources, Cerberus' lenders are still ready to provide the debt, including bridge financing if necessary."
United Rentals said the lawsuit contends:
- that RAM is violating the agreement, acting in bad faith and that it doesn't "have the right to pay a reverse break-up fee and simply walk away;"
- there is no financing barrier and RAM has commitment letters;
- the agreement's specific performance provision calls for RAM to draw down the financing and consummate the deal "under precisely these circumstances;" and
- that RAM sought to further its scheme to buy United Rentals at a discount in taking advantage of the company's falling share price after their plans to abandon the deal were leaked to the press.
Reuters first reported the news Wednesday morning, and United Rentals confirmed late in the day. Cerberus agreed to pay $34.50 per share in late July. United Rentals shares fell $10.24 apiece on the news that day to close at $23.50 each. By midmorning on Monday, they were just above $23 apiece.
The company said Monday it tapped New York law firm Orans, Elsen & Lupert LLP and Rosenthal, Monhait & Goddess PA of Wilmington, Del., to represent it. — Carolyn Murphy
See United Rentals press release Nov.19
See TheDeal.com story Nov. 15 on Cerberus' liability
See TheDeal.com story Nov. 14 on the stalled deal
See Reuters item Nov. 14 ahead of the news
