The Jana Partners Hertz And United Rentals Dance

The Jana Partners Hertz And United Rentals Dance
Jana Partners

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.

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