29.05.2007

Cool reception for RSC IPO

Investors have given RSC Holdings, the American rental company, which was previously part of Atlas Copco, a cool reception as its IPO raised $458.3 million (£236 million) million, with the initial 20.8 million shares selling for $22 each, slightly less than the $23 to $25 range the company had expected.

RSC’s initial foray into the public market was seen as disappointing by analysts as first-day markets closed with shares trading at $19.

Some 20.8 million shares were sold into the offer, including 8.3 million by existing shareholders.

RSC's public offering comes only seven months after Atlas Copco sold a majority stake in the rental business.

Ripplewood Holdings and Oak Hill Capital Management paid $3.4 billion plus as much as $400 million pending the achievement of profitability targets in 2008. Atlas Copco retained a 14.5 percent stake although this reduced to 11 percent after the IPO. Ripplewood and Oak Hill held on to a 67 percent ownership.

The poor IPO performance may reflect RSC's debt level ($2.75 bn) which was seen as a concern by potential investors. RSC intends to use IPO proceeds to repay $253.7 million of debt, pay an associated prepayment penalty of $5.1 million and pay a $20 million fee to Ripplewood and Oak Hill to terminate a management advisory agreement.

RSC earned $20.2 million on a revenue of $406.6 million in the first quarter, compared with $41.2 million on revenue of $385.9 million in the first quarter of 2006.

The company earned $186.5 million on revenue of $1.6 billion in 2006 and $164.2 million on revenue of $1.5 billion in 2005. By the end of the first quarter, RSC’s rental fleet had an original equipment cost of $2.4 billion and its average fleet age was 25 months.