Atlas Copco agreed to sell 85.5 percent of RSC Equipment Rental to private equity firms Ripplewood Holdings and Oak Hill Capital Management for about $3.8 billion. Atlas Copco will receive about $3.3 billion in cash and assumed liabilities, plus up to $400 million of additional consideration in the form of notes, based on the achievement of profitability targets through 2008.

According to the terms of the transaction, announced Friday, the Stockholm, Sweden-based manufacturer will retain a 14.5-percent stake in the company. Based in Scottsdale, Ariz., RSC is the second largest equipment rental company in North America, with more than 5,000 employees and more than 450 locations. For the 12-month period ended June 30, the company generated more than $1.5 billion in revenue.

“We are very satisfied with the deal,” said Atlas Copco CEO Gunnar Brock, who said that holding on to the 14.5-percent stake would create a higher value if the company decides to sell out completely later on. “It results in substantial cash proceeds, a capital gain and a minority stake in the best equipment rental company in North America.”

Ripplewood Holdings and Oak Hill Capital will be equal investment partners in the transaction. Both companies have considerable investment expertise in the rental industry. Ripplewood Holdings first invested in the industry in 1998 with its purchase of ICM Equipment Co., which has since merged with Head and Engquist to form H&E Equipment Services. Oak Hill Capital was part of the ownership group that led a buyout of William Scotsman, a rental provider of modular office space, in 1997. Dennis Nayden, managing partner at Oak Hill Capital, is a former CEO and chairman of GE Capital, where he oversaw its large leasing and equipment finance operations.

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