CWS Market Review – January 29, 2024

Exciting news today! One of our Buy List stocks, McGrath RentCorp (MGRC), is being bought out for $123 per share. That’s a 10% premium to Friday’s closing price.

I wanted to send you this special alert to let you know what’s happening.

McGrath RentCorp has reached a deal with WillScot Mobile Mini Holdings (WSC) to be bought for $123 per share in cash and stock. WillScott describes itself as “a leader in innovative temporary space solutions.” McGrath is one of our new buys this year.

The deal is expected to close in the second quarter of this year. WillScot merged with Mobile Mini a few years ago.

I’ll be honest – I’m not wild about this deal price. I think McGrath may be selling itself short. The stock was close to $123 just a few weeks ago. Still, I understand there was probably a lot of negotiating behind the scenes, and that could be why a large amount of the deal is in cash.

Both boards have approved the deal, but it’s not done just yet. The deal still needs regulatory approval and the approval of shareholders. I don’t think that will be a problem, and the stock market apparently agrees. You can tell that by how closely MGRC has been trading to $123 per share.

Here are the details. McGrath shareholders have a choice. For each share of MGRC they own, they can either get $123.00 in cash or 2.8211 shares of WillScot Mobile Mini. However, shareholders may run up against limitations since the entire deal is to be 60% cash and 40% stock. I don’t know the details just yet. Personally, I favor getting as many shares of WSC as possible.

In the press release, the companies spell out the benefits of the deal:

• Highly complementary businesses with diversified customer segments: The acquisition brings together two complementary businesses, enhancing diversity across customer segments. The combined company’s broad offering, attractive unit economics and long rental durations underpin its uniquely predictable recurring cash flow profile. On a pro forma basis, approximately 90% of combined total revenue is derived from leasing and related services, while the addition of Enviroplex expands WillScot Mobile Mini’s permanent modular capabilities.
• Operating synergies with a high confidence of realization: $50 million of run-rate operating synergies expected to be achieved within 24 months of closing. Confidence in targets reinforced by WillScot Mobile Mini’s long history of successful M&A integrations.
• Increased scale allowing accelerated rollout of growth initiatives: The combined customer base and rental fleet represent an expanded platform for the rollout of WillScot Mobile Mini’s strategic levers, such as Value-Added Products and Services, cross-selling and commercial best practices, and operations excellence. Together, these provide a clear path to multiple years of sustained growth and margin expansion.
• Strong financial position underpins reinvestment in growth: The combined company’s strengthened financial profile, enhanced cash generation and de-leveraging capability, and disciplined capital allocation amplify WillScot Mobile Mini’s ability to reinvest in growth and compound returns.

McGrath shareholders will ultimately own 12.6% of WSC. Putting aside my concerns about the sale price, this is a very good day for us and for CWS.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

P.S. If you want more info on our ETF, you can check out the ETF’s website.

Posted by on January 29th, 2024 at 1:15 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.