United Rentals Takes Cerberus to Court

The company takes legal action to force a buyout.
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United Rentals (URI) - Get Report filed a lawsuit against Cerberus Capital Management seeking to force the private-equity firm to follow through with its buyout of the rental-equipment company.

The suit comes after Cerberus said last week that it wanted to pay a $100 million break-up fee to

end the deal, partly because of volatility in the credit markets. United Rentals has contended that there are no financing obstacles to the $7 billion buyout, nor any significant changes in its business.

United Rentals said Monday that RAM Holdings and RAM Acquisition, two acquisition vehicles formed by Cerberus, are violating the merger agreement and do not have the right to simply pay the break-fee and walk away from the deal.

The company called Cerberus' action a "naked ploy" to extract a lower price for the buyout. Cerberus said last week it was willing to negotiate a revised deal.

Through the lawsuit, filed in the Delaware Court of Chancery, United Rentals is seeking to consummate the merger agreement in accordance with its original terms.

With the suit, United Rentals joins

Sallie Mae

(SLM) - Get Report

in launching a legal battle with its potential acquirers to force a buyout. Other companies, such as

Harman

(HAR)

and

Acxiom

(ACXM)

, have seen their deals fall apart as turmoil in the credit markets affects private-equity firms' ability to raise financing.

Shares of United Rentals recently were down 37 cents, or 1.6%, to $23. The buyout had called for Cerberus to pay $34.50 a share for the company.