[LOGO]
June 28, 1999
Board of Directors
Rental Service Corporation
0000 X. Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Members of the Board of Directors:
Rental Service Corporation (the "Company"), Atlas Copco North America Inc.
(the "Acquiror") and Pandion Acquisition Corp., a wholly owned subsidiary of the
Acquiror (the "Acquisition Sub"), propose to enter into an Agreement and Plan of
Merger dated as of June 28, 1999 (the "Agreement") pursuant to which (i) the
Acquiror and the Acquisition Sub would commence a tender offer (the "Tender
Offer") for all outstanding shares of the Company's common stock, par value
$0.01 per share, of the Company (the "Company Shares") for $29.00 per share, net
to the seller in cash (the "Consideration"), and (ii) the Acquisition Sub would
be merged with the Company in a merger (the "Merger"), in which each Company
Share not acquired in the Tender Offer, other than Company Shares held in
treasury or held by the Acquiror or any affiliate of the Acquiror or as to which
dissenter's rights have been perfected, would be converted into the right to
receive the Consideration. The Tender Offer and the Merger, taken together, are
referred to as the "Transaction".
You have asked us whether, in our opinion, the Consideration to be received
by the holders of the Company Shares pursuant to the Merger Agreement is fair
from a financial point of view to such holders.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company furnished to us by the Company;
(3) Conducted discussions with members of senior management of the Company
concerning the matters described in clauses 1 and 2 above;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and compared them with those of certain publicly traded companies
that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and compared them with
those of certain publicly traded companies that we deemed to be relevant;
(6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions that we deemed to be
relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
(8) Reviewed the Agreement;
(9) Participated in the Company's review of its strategic alternatives; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of the Company. With respect
to the financial forecast information furnished to or discussed with us by the
Company, we have assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgment of the Company's management as
to the expected future financial performance of the Company.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof.
We are acting as financial advisor to the Company in connection with the
Transaction and will receive a fee from the Company for our services, a
significant portion of which is contingent upon the consummation of the
Transaction. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of our engagement. We are currently acting as financial
advisor to the Company in connection with the unsolicited tender offer for all
of the outstanding Company Shares at a price of $22.75 per share in cash by UR
Acquisition Corporation, a wholly owned subsidiary of United Rentals, Inc. We
have, in the past, provided financing services to the Company, including acting
as lead underwriter in connection with an offering of the Company Shares in
August 1998. We are currently providing financial advisory services and have, in
the past, provided financing and financial advisory services to the Acquiror and
its affiliates, including acting as lead manager in connection with a debt
offering for an affiliate of the Acquiror in 1998 and as dealer manager in
connection with a tender offer for Prime Service, Inc. by a wholly owned
subsidiary of the Acquiror in 1997, and expect to continue to do so and have
received, and may receive, fees for the rendering of such services. In addition,
in the ordinary course of our business, we may actively trade the Company Shares
and other securities of the Company, as well as securities of the Acquiror and
other securities of the Acquiror for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Transaction and does not constitute a
recommendation to any stockholder as to whether such stockholder should tender
any Company Shares pursuant to the Tender Offer and how such stockholder should
vote on the proposed Merger or any matter related thereto.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Consideration to be received by the holders of the
Company Shares pursuant to the Merger Agreement is fair from a financial point
of view to the holders of such shares.
Very truly yours,
XXXXXXX LYNCH, XXXXXX, XXXXXX & XXXXX
INCORPORATED
