Herc Holdings Inc. (HRI) stock plummeted 16.4% in pre-market trading on Tuesday, following the company's announcement of a bid to acquire H&E Equipment Services (HEES) in a cash and stock deal. The proposed acquisition has raised concerns among investors about the potential risks and integration challenges associated with the transaction.
According to reports, Herc made a superior proposal to acquire all outstanding common stock of H&E Equipment Services, outbidding a previous offer from industry rival United Rentals (URI). While the financial details were not disclosed, large acquisitions often face scrutiny from investors who weigh the potential benefits against the costs and complexities of integrating operations and corporate cultures.
Herc's bid values H&E Equipment at around $3.8 billion, a significant acquisition for the $5.7 billion company. The use of Herc's shares as part of the consideration has also likely contributed to the stock's decline, as shares of acquirers tend to slip in stock-based transactions. Investors may question whether the deal creates sufficient value for Herc's shareholders, particularly if the purchase price is viewed as too high.
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