DEFA14A: McGrath RentCorp Addresses Shareholder Lawsuits with Supplemental Proxy Disclosures Amid WillScot Mobile Mini Merger

McGrath RentCorp provides supplemental disclosures to its proxy statement to address shareholder lawsuits challenging the adequacy of disclosures related to the proposed merger with WillScot Mobile Mini Holdings Corp.

Summary

• McGrath RentCorp is supplementing its proxy statement related to the proposed merger with WillScot Mobile Mini Holdings Corp. to address concerns raised in shareholder lawsuits.
• The company received nine demand letters and three complaints from purported shareholders challenging the adequacy of certain disclosures in the proxy statement.
• McGrath RentCorp believes the allegations are without merit but is providing supplemental disclosures to avoid potential litigation and delay the merger.
• The supplemental disclosures include additional details regarding the background of the transaction and the financial analyses conducted by Goldman Sachs.
• Specifically, the disclosures add information about confidentiality agreements with WillScot Mobile Mini and another party (Party A), including details about standstill provisions.
• The disclosures also provide more detail on how Goldman Sachs derived ranges of illustrative equity values for McGrath and the pro forma combined company.
• The company reaffirms that the original disclosures comply with applicable law and that the supplemental disclosures are not an admission of legal necessity or materiality.
• Investors are urged to read the supplemental disclosures in conjunction with the original proxy statement and other relevant documents filed with the SEC.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the document addresses shareholder lawsuits, it also aims to ensure the merger proceeds smoothly. The supplemental disclosures provide additional transparency, which is generally viewed favorably. However, the existence of lawsuits introduces some uncertainty.

Positives

• McGrath RentCorp is proactively addressing shareholder concerns by providing supplemental disclosures.
• The company is aiming to avoid potential litigation and ensure the merger proceeds smoothly.
• The supplemental disclosures provide additional transparency regarding the background of the transaction and the financial analyses.

Negatives

• The shareholder lawsuits indicate potential dissatisfaction with the initial disclosures.
• The need for supplemental disclosures suggests possible deficiencies in the original proxy statement.
• The lawsuits and supplemental disclosures could potentially delay or disrupt the merger.

Risks

• The occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement.
• The risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated.
• Risks that any of the other closing conditions to the Proposed Transaction may not be satisfied in a timely manner.
• Risks related to potential litigation brought in connection with the Proposed Transaction.
• Negative perceptions of the Company and its business, operations, financial condition and the industry in which it operates as a result of the Proposed Transaction.
• Risks related to disruption of management time from ongoing business operations due to the Proposed Transaction.
• Effects of the announcement, pendency or completion of the Proposed Transaction on the ability of the Company to retain customers and retain and hire key personnel and maintain relationships with suppliers and partners, and on the Companys operating results and businesses generally.
• Risks related to the potential impact of general economic, political and market factors on the parties to the Proposed Transaction or the Proposed Transaction.

Future Outlook

The document contains forward-looking statements regarding the timing and completion of the merger, anticipated financial impacts, combined company financial projections, and expected synergies, all of which are subject to risks and uncertainties.

Management Comments

• The Company believes that the allegations in the Shareholder Actions are without merit.
• The Company denies that it has violated any laws or breached any duties to the Companys shareholders, denies all allegations in the Shareholder Actions, and believes no supplemental disclosure to the Proxy Statement was or is required under any applicable law, rule or regulation.

Industry Context

The document references selected transactions in the mobile modular industry, including McGrath RentCorp's acquisition of Vesta Housing Solutions Holdings, Inc. in February 2023, United Rentals' acquisition of General Finance Corporation in April 2021, and WillScot Corporation's acquisition of Mobile Mini, Inc. in March 2020, providing context for valuation multiples used in the financial analysis.

Comparison to Industry Standards

• Goldman Sachs considered current and historical NTM EV/EBITDA multiples for McGrath (mean of 7.8x over 10 years, 8.7x over 5 years, 9.1x over 3 years, and 9.6x over 1 year).
• Goldman Sachs considered current and historical NTM EV/EBITDA multiples for WillScot Mobile Mini (mean of 10.5x over 10 years, 10.7x over 5 years, 11.9x over 3 years, and 10.9x over 1 year).
• The analysis included selected transactions in the mobile modular industry and other industries since 2014, comparing implied EV multiples of target companies.
• Comparable transactions include Vesta Housing Solutions Holdings, Inc. acquired by McGrath RentCorp at 10.0x LTM EV/EBITDA, General Finance Corporation acquired by United Rentals, Inc. at 10.6x LTM EV/EBITDA, and Mobile Mini, Inc. acquired by WillScot Corporation at 11.4x LTM EV/EBITDA.

Legal Proceedings

• Nine demand letters and three complaints have been received by the Company sent on behalf of purported Company shareholders challenging the adequacy of certain disclosures made in the Proxy Statement (collectively, the Shareholder Actions).

Stakeholder Impact

• The supplemental disclosures aim to address shareholder concerns and ensure they have sufficient information to make informed decisions regarding the merger.
• The completion of the merger will impact employees, customers, suppliers, and other stakeholders of both McGrath RentCorp and WillScot Mobile Mini.

Next Steps

• Shareholders are urged to read the proxy statement/prospectus and other relevant documents filed with the SEC carefully and in their entirety before making any decision regarding the proposed transaction.
• The company and Parent will continue to file other documents regarding the Proposed Transaction with the SEC.

Key Dates

Keywords

merger, McGrath RentCorp, WillScot Mobile Mini, proxy statement, shareholder lawsuits, disclosures, financial analysis, Goldman Sachs, EBITDA, valuation