ASHTEAD'S acquisition of Rentokil Initial's US businesses may have received a cool reception in the City but it does present the company with brighter prospects than those offered by its home market.
For the UK's plant hire sector has not been a major beneficiary of the upturn in the industry's workload.
Results from Hewden Stuart last week showed that while turnover rose 6.5 per cent pre-tax profits actually fell 3 per cent as overcapacity in the powered access and mobile crane sector took its toll leaving Hewden having to axe around 200 staff.
Those contractors that hived off their plant businesses to rely on the hire market were probably right to do so. Unlike previous recoveries, this one appears to have little to mop up excess capacity in the sector - plant largely remains a seller's market. With little sign of consolidation among the estimated 1,000 general hirers in the UK, Hewden's shares trade on little over seven times earnings.
Corporate activity at the larger end of the industry also seems to be muted. After many months, no serious buyers have emerged for the former BET UK plant businesses owned by Rentokil Initial and there seems to have been little interest in Maxxiom, the joint plant venture between Carillion and Bovis. The potential bidder for Ashtead itself, reported to be in the wings earlier this year, did not materialise in the end.
News of its US deal left Ashtead's shares 7p lower at 98p as analysts dwelt on the heavy borrowings the purchase will entail rather than the scope offered by its new position as one of the top five plant hirers in the US.
Previous forays by UK plant groups into the fragmented US market have had mixed results and none have found a formula for sustainable growth through organic expansion or piecemeal acquisitions.
With a £320 million bid Ashtead has now made a frontal assault and while a verdict on the terms of the deal will not emerge until next year, the group cannot be faulted for boldness.