United Rentals Deal in Jeopardy

Cerberus wants to pull out of the $7 billion buyout.
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Cerberus Capital Management is looking to get out of its $7 billion deal to buy

United Rentals

(URI) - Get Report

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The private-equity firm informed the rental-equipment company that it isn't prepared to proceed with the deal under the terms set forth in the agreement, United Rentals confirmed shortly before the market's close Wednesday.

The company called the move "unwarranted and incompatible with the covenants of the merger agreement."

Speculation about the deal's collapse had sent shares of United Rentals plunging throughout the day. The stock tumbled nearly 30% to $23.93.

The buyout agreement, signed July 22, called for Cerberus to pay $34.50 a share for United Rentals.

According to United Rentals, Cerberus "has specifically confirmed" that no material change has occurred at the company. United Rentals has hired a lawyer to explore its legal options.

A freeze-up in the credit markets over the summer has dried up private-equity demand for big buyouts, since it's much harder to secure financing. But United Rentals said in its press release that Cerberus has received binding commitment letters from its banks to provide financing through bridge facilities.