Nesco to acquire heavy equipment solutions provider Custom Truck One Source for $1.4bn

Nesco acquisition of CTOS : Indiana-based Nesco Holdings has agreed to acquire heavy equipment solutions provider Custom Truck One Source (CTOS) for $1.475 billion in a move to create a major one-stop-shop specialty rental equipment provider in North America.

Both companies have been engaged in offering specialized truck and heavy equipment solutions. These include rental, sales, and aftermarket parts and service.

The combined specialty rental equipment provider is expected to cater to highly attractive and growing infrastructure end-markets, which include transmission and distribution (T&D), the 5G revolution build-out, and major rail and other national infrastructure initiatives.

The enlarged firm will offer equipment for rent, new sales, used sales, aftermarket parts and service and retail parts, along with tools and accessories.

Commenting on Nesco acquisition of CTOS, Lee Jacobson – CEO of Nesco said: “This combination will create new opportunities for our company, our employees and the customers we serve.

“Nesco and CTOS are a perfect fit and together will be well positioned to pursue numerous opportunities in the rapidly growing specialty rental segment. We couldn’t have reached this milestone without the hard work of our team, and we look forward to working together with CTOS to ensure a seamless transition.”

To be based in Custom Truck One Source’s headquarters in Kansas City, the enlarged specialty rental equipment provider will operate on a national scale in the US with more than 1,800 employees, 46 company-operated locations along with a rental fleet that will be almost double in size with around 9,000 units and over $1.3 billion in combined original equipment cost (OEC).

Fred Ross – CEO of Custom Truck One Source, commenting on Nesco acquisition of CTOS, said: “We are excited to bring together our complementary companies to provide a full range of solutions to our customers.

“I want to thank our dedicated employees for all that they do each day. Looking ahead, as a combined company, we will be very well positioned to capitalize on a broad range of growth opportunities and better serve our customers’ specialty rental equipment needs on a national basis.

“We look forward to working together with the Nesco team to realize substantial synergies that will create meaningful value for all our stakeholders.”

Nesco acquisition of CTOS (Custom Truck One Source). Photo courtesy of Custom Truck One Source.

In connection with the deal, an affiliate of Platinum Equity will invest more than $850 million into Nesco for acquiring newly issued common stock, priced at $5.00 per share.

Additionally, existing shareholders of Custom Truck One Source, which include certain funds managed by The Blackstone Group, as the company’s current majority owner, and some members of the company’s management team, are expected to invest nearly $100 million into Nesco. This will be in exchange for newly issued common stock, at the same price of $5.00 per share.

Energy Capital Partners (ECP) and Capitol Investment, who currently have a combined stake of around 70% in Nesco, will retain their entire ownership positions in the enlarged company. The duo has entered into voting agreements to back the deal.

Post-closing of the deal, Platinum Equity is likely to own around 57% stake in the enlarged Nesco, with existing shareholders of Custom Truck One Source will have a stake of around 7%.

Energy Capital Partners will own nearly 10%, while Capitol Investment will hold a stake of around 3% in the enlarged specialty rental equipment provider.

Previously, Platinum Equity was the majority owner of Nesco between 2011 and 2014. The company has been a long-time investor in a variety of specialty rental businesses.

The deal, which is subject to shareholder approval and meeting of other customary conditions, is expected to close in Q1 2021.