Cerberus buys United Rentals for $4B

NEW YORK (CNNMoney.com) -- Private equity firm Cerberus Capital Management agreed Monday to purchase United Rentals for $4 billion in cash, plus the assumption of $2.6 billion in cash.

The firm will pay $34.50 a share for the equipment rental company, which represents about a 7 percent premium from Friday's closing price.

United Rentals (up $0.68 to $33.05, Charts) shares jumped 2 percent in early session trading on the New York Stock Exchange.

Under terms of the deal, United Rentals may continue to solicit proposals for alternative transactions through Aug. 31.

Citigroup Analyst David Raso wrote in a note to clients that it is possible but not likely that a rival bidder could emerge, Reuters reported.

"Given URI has been available for three months, this [rival bidder] scenario may be less likely than in a surprise purchase announcement where an asset is suddenly put into play," Raso wrote. He upgraded United Rentals shares from "sell" to "hold."

The company has more than 690 rental locations across North America, and 12,000 employees. It had $3.6 billion in revenue in 2006.

Shares of United Rentals have risen 17.5 percent since its signaled it was for sale in an April 10 announcement that it was looking at a broad range of strategic options.

United Rentals' board of directors has approved the takeover and the deal is pending shareholder approval.

Competitors include Sunbelt Rentals, a unit of British equipment rental firm Ashtead Group, and RSC Holdings (Charts), which saw private equity firms Ripplewood Holdings and Oak Hill Capital Management buy a controlling stake in the company last year.

-- Reuters contributed to this report