Ripplewood, Oak Hill in $3.4bn rental deal

The two private equity firms have agreed to buy a stake in RSC Equipment Rental, the second-largest construction equipment rental company in the US.

Ripplewood Holdings and Oak Hill Capital Management announced today an agreement to buy a majority stake in the construction-equipment rental unit of Atlas Copco.

The investment in the unit, RSC Equipment Rental, is valued at approximately $3.4 billion (€2.7 billion). The firms may invest an additional $400 million before 2008 based on the performance of the company.

Debt for the transaction will be provided by Citibank and Deutsche Bank.

Atlas Copco will retain a 14.5 percent stake in the company.

Ripplewood, based in New York, and Oak Hill, based in Stamford, Connecticut, will be equal investment partners in the deal, according to a press release. Ripplewood has invested in heavy equipment rental companies before, including the 1998 buyout of ICM Equipment. Oak Hill has been an investor in Williams Scotsman, a provider of modular office space.

RSC is the second-largest renter of heavy construction equipment in the US. The business will continue to be run by chief executive Erik Olsson.

Denis Nayden, the Oak Hill managing director who led the deal, is the former chief executive officer and chairman of GE Capital, a giant in the equipment leasing and finance industry. In a statement Nayden said: “We’ve been highly impressed by the turnaround effort that RSC management has engineered since 2003.”

The deal is the first major US deal for Ripplewood since its unsuccessful bid for washing machine maker Maytag last year.