The Jana Partners Hertz And United Rentals Dance

United Rentals is still the talk of the equipment rental town, despite the fact that Jana Partners didn’t take a new stake in the company. I won’t rehash the false headlines [you can read our notes on that fiasco here] but in any case there is a story worth telling in terms of Jana’s involvement with United Rentals and Hertz – both major players in the equipment rental business.

Consolidation is a powerful trend. Something that Jana is hoping will juice returns at Hertz, but there’s also the pending spinoff of HERC, which is Hertz Equipment Rental Corp. Once this happens [the timeline is up in the air given the accounting shenanigans] we could see Jana push HERC and United Rentals to merge.

Jana has floated the idea of United Rentals buying Hertz. After a new stake in United Rentals during 1Q15, the fund now owns 5.8% of United Rentals and 9.3% of Hertz. It’s been active in Hertz since October 2014 with shares down 3% since then.

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United Rentals has had some headwinds given low oil prices, where just under 10% of its revenues are derived from the oil and gas markets. The hope is that the benefits of low-oil, such as cheaper operating costs for construction companies, will outweigh the setback over the interim.

That’s really part of Jana’s thesis, where the selloff, closely correlating a fall in oil prices, is unwarranted. As Jana recently noted, United Rentals is in a leadership position in the equipment rental business, with a top notch CEO, and so investors are overreacting if they are selling United Rentals due to falling oil prices.