In its 45-year history, McGrath RentCorp (NASDAQ: MGRC) has had many encouraging pieces of news to report to its shareholders and the world at large. Unfortunately for the business-to-business equipment rental specialist, its top news item on Wednesday wasn't so positive. On the back of that, investors traded out of the stock to leave it with an over 3% decline in price. This was a more pronounced slide than the 0.3% dip of the S&P 500 index on the day.
Merger deal terminated
McGrath announced that it and peer WillScot Holdings (NASDAQ: WSC) have mutually agreed to cancel their planned merger. Per the terms of the two companies' merger agreement, McGrath is to receive a termination fee of $180 million from WillScot.
The pair originally announced the tie-up in January. Under the terms of their deal, WillScot was to acquire McGrath for $3.8 billion in cash and stock, with the former comprising 60% of the purchase and the latter the remainder. That amount represented a premium of 10% over McGrath's share price on the trading day prior to the announcement.
However, since McGrath and WillScot operate in similar segments and are major players in their niches, the deal attracted scrutiny from the Federal Trade Commission (FTC). Soon after the announcement, the government agency submitted requests for information from the two companies in order to gauge whether the merger would be anti-competitive.
Steady as it goes
In its press release on the merger's termination, McGrath pledged that its "strategic focus on our modular and portable storage growth opportunities will continue." But the company's investors, happy with the share price bump the original announcement provided, would surely rather have seen the deal be consummated than hear promises of a business-as-usual strategy.
Should you invest $1,000 in McGrath RentCorp right now?
Before you buy stock in McGrath RentCorp, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and McGrath RentCorp wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $708,348!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 16, 2024
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends McGrath RentCorp. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
