Hyde Park Acquisition Corp. To Acquire Essex Crane Rental Corp.
New York NY - Hyde Park Acquisition Corp. recently announced that it has entered into a definitive agreement to acquire privately-held Essex Crane Rental Corp. ("Essex" or the "Company"), which owns the largest specialized fleet of lattice-boom crawler cranes and attachments in North America. Chicago-based Essex operates an industry-leading fleet of approximately 400 high-lift capacity crawler cranes which has been assembled throughout its 48 years of operation. The Company's primary end markets serviced include bridge and road construction, power, water treatment, refineries, alternative energy and other infrastructure related projects. All of these end markets are experiencing strong growth trends due to investment in transportation infrastructure, energy infrastructure, municipal utilities and chemical/petrochemical facilities.
As a result of the powerful secular trends within the end markets it serves, Essex is benefiting from a favorable utilization and rental rate environment. On average, the Company's rental contracts are between 6 and 18 months, with an average expected life of over 9 months. As such, Essex's earnings are highly predictable and visible, and supported by a strong backlog. Essex's backlog at December 31, 2007 was $33.4M, an increase of 43% over the comparable prior year backlog. Besides having an orderly liquidation value and a replacement value well in excess of the purchase price paid by Hyde Park, Essex's assets are not subject to technological obsolescence and have useful lives of approximately 50 years. Additionally, maintenance capital expenditure under the company's business model is limited.
For the fiscal year ended December 31, 2007, Essex generated revenues of $64.2M, total EBITDA1 of $37.2M (including rental EBITDA2 of $32.5M which provided a margin of 51%), and invested maintenance capital expenditure of approximately $2.1M. Over the fiscal periods 2004 through 2007, revenue and total EBITDA grew at cumulative average growth rates of 31% and 55% respectively.
Under the terms of the transaction, Hyde Park will acquire Essex from private equity firm Kirtland Capital Partners for total consideration of $210M plus transaction expenses and an adjustment for crane purchases and sales prior to closing. The transaction will be financed through a combination of: up to $100 million in proceeds from Hyde Park; a $5M equity investment by the Essex management team; a $5M equity investment by Kirtland Capital Partners, Essex's current private equity investors; a $1M equity investment by Macquarie Capital (USA), Inc.; and a $117M drawdown of a fully committed asset-backed credit facility from a consortium of institutional lending sources.
Laurence S. Levy, Chairman and CEO of Hyde Park, commented, "Hyde Park was funded with the intention of acquiring an asset with strong ties to the infrastructure market. Essex is intimately linked to key infrastructure end-markets, such as transportation, utilities and energy, and I am excited about the opportunities offered by this investment. After a comprehensive due diligence effort, we found Essex to be a company with a leading market position in the niche crawler crane rental space, a sector characterized by long economic equipment lives, strong supply-demand dynamics, 6-18 month rental periods and limited obolesence risk. Furthermore, Essex has an outstanding management team, headed by CEO Ron Schad, who are experts in their field and committed to maintaining and growing Essex's leading market position. We are acquiring Essex at an attractive valuation of about 84% of its orderly liquidation value, and at 5.6X 2007 total EBITDA of $37.2M. Additionally Essex has a tax loss carryforward which will save future taxes with a present value of about $24M. I am pleased that we have secured a fully committed debt facility in the current credit environment to close this transaction. The debt facility is attractive as it requires no amortization and provides us with ample liquidity for future growth and investment.
"Financially, Essex is able to achieve EBITDA margins in excess of 45% due to the simplicity of its business model and the "pass-through" nature of many of its costs. This, coupled with a contract backlog and limited maintenance capital expenditure requirements provides the opportunity for highly visible free cash flow generation for either fleet investment or distributions to shareholders. I am also excited that the Hyde Park shareholders will be the beneficiaries of future earnings resulting from a program to invest $32M in growth fleet additions of which half has already been spent and the remainder will be spent during 2008. I believe that, given Essex's strong market position, its attractive debt facility, its moderately levered balance sheet and its attractive free cash flow characteristics, the Company will have numerous growth opportunities and we look forward to partnering with management to realize these."
Management of Essex is anticipated to remain unchanged following the transaction. Ron Schad will continue in his role as Chief Executive Officer of Essex and will draw on his 26 year crawler crane industry expertise in guiding the Company forward. The senior management team possesses strong crane industry experience and extensive relationships.
Ron Schad, CEO of Essex, continued, "We at Essex look forward to partnering with Hyde Park and believe that we will benefit greatly from their experience in leading infrastructure and related companies. Essex's market position has improved dramatically under Kirtland Capital's ownership. We have invested heavily in our fleet, our people and our processes to improve the quality of the cranes and services we provide to our customers. Our focus on providing cranes to our customers that complete their projects on schedule and on budget has proven incredibly valuable to North America's leading infrastructure contractors. I am excited by our shared vision with Hyde Park to continue the aggressive investment in our fleet and our people. This strategy for continued improvement and growth of our fleet and its capabilities will be positive for our investors and our customers. I believe Essex has an excellent opportunity to grow significantly, both organically and through acquisition, in coming years and feel that this transaction places us in a strong position to realize our potential."
Upon closing of the transaction, which is expected in the second half of 2008, Hyde Park will change its name to Essex Crane Rental Corp. and will seek a Nasdaq listing. Macquarie Capital (USA), Inc. acted as financial advisor and Katten Muchin Rosenman LLP acted as legal advisor to Hyde Park in relation to its investment in Essex. For additional information on the acquisition, see the Form 8-K filed by Hyde Park Acquisition Corp., which can be obtained, without charge, at the Securities and Exchange Commission's internet site http://www.sec.gov.
SOURCE: Hyde Park Acquisition Corp.