Shares of Neff Corporation (NYSE:NEFF) closed up 18.7% on Monday after the earth-moving equipment renter revealed that it has received a "superior offer" to acquire it -- superior to the offer that H&E Equipment (NASDAQ:HEES) made last month, that is.
On July 14, H&E Equipment Services announced it had entered into a "definitive merger agreement" to acquire Neff before year-end for $21.07 per share in cash. Including Neff's $690 million in net debt, that made the deal worth $1.2 billion.
Turns out, though, that deal wasn't quite as "definitive" as H&E may have thought. Today, Neff revealed that a second "strategic bidder" has offered to up H&E's offer and buy Neff for $25 per share -- also all cash -- and Neff is inclined to (and within its rights to) prefer the superior offer.
As Neff explained in its press release, H&E now has the option of matching the as-yet-anonymous strategic bidder's offer. In that case, Neff says it "is required to, and intends to" negotiate with H&E to consummate the initial agreement and that H&E has five days "to propose modifications to the terms of the Existing Merger Agreement and related agreements" if it wants to buy Neff at the higher price now on offer.
Failing that, Neff will have to pay H&E a $13.2 termination fee to switch suitors. Of course, given that the strategic bidder's offer is now $93.5 million higher than what Neff initially expected to get, that decision should be a no-brainer for Neff -- it should accept the higher offer and happily pay the breakup fee. Unless, of course, H&E decides to raise its offer to match the interloper's bid.
Let the bidding war commence.