McGrath RentCorp (WSC) Earnings Call Transcript & Summary

Good morning, and welcome to the WillScot Mobile Mini Conference Call. At this time, I would like to inform you that this conference is being recorded. [Operator Instructions]. I will now turn the conference over to Nick Girardi, Senior Director of Treasury and Investor Relations. Please go ahead.

Good morning, and welcome to the WillScot Mobile Mini Call to discuss our company's announcement earlier today, that we have entered into a definitive agreement to acquire McGrath RentCorp. Participants on today's call include Brad Soultz, Chief Executive Officer of WillScot Mobile Mini; Tim Boswell, President and Chief Financial Officer of WillScot Mobile Mini; and Joseph Hanna, President and Chief Executive Officer of McGrath RentCorp. Today's presentation material may be found on the Investor Relations section of the WillScot Mobile Mini website. Slides 2 and 3 contain our safe harbor statement. We will be making forward-looking statements during the presentation and our Q&A session. Our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control. As a result, our actual results may differ materially from today's comments. For a more complete description of the factors that could cause actual results to differ and other possible risks, please refer to the safe harbor statement in our presentation and our filings with the SEC.

Thank you, Nick. Good morning, everyone. We're excited to speak to you today about the planned acquisition of McGrath, which we announced earlier this morning. Starting on Slide 5, I'll provide an overview of this transaction, why it makes sense for both of our companies, the benefits that our shareholders can look forward to and the significant potential upside for both Mobile Mini, WillScot and McGrath's shareholders. In short, this combination enables us to amplify our long-term growth prospects and closely aligns with our growth strategy. McGrath is a complementary business, offering a valuable opportunity to deploy our organic growth initiatives across the larger platform. With this transaction, we aim to create enhanced value for our shareholders, while broadening our reach into new geographies and across customer segments. It is an accelerant of our growth with no change to our overall strategy nor capital allocation strategy. Together, we'll have an increased fleet size representing over 160 million square feet of relocatable commercial space and we'll be able to implement WillScot Mobile Mini strategic initiatives, like value-added products and services across an expanded portfolio, further enhancing our penetration opportunity. This transaction aligns seamlessly with our commitment to accretive sustainable growth. Now while Tim will dive into more specific details of the transaction and the associated synergies, I want to reiterate how our approach to growth is balanced between organic and inorganic opportunities. Importantly, we have a long story history of effective integration and successfully meeting synergy expectations once combined. The combination of our outstanding teams and complementary product lines, in addition to our highly complementary customer segments and geographies, will help enhance our position as the leading North American provider of turnkey space solutions. The combined company will have strong free cash flow generation, predictable lease revenues and long-lived assets with attractive unit economics. Together, we expect to enhance the value we can provide to our customers, while driving sustainable long-term growth and value creation for our shareholders and continue to be a great place for our combined employees to work. Before I turn the call over to Tim to discuss the specifics of the transaction, I'd like to introduce my colleague and counterpart, Joe Hanna, the CEO of McGrath, to say a few words. Joe?

Thank you, Brad, and good morning, everyone. I share the WillScot Mobile Mini's team's enthusiasm for this acquisition. The combination of these companies and the opportunities that lie ahead will help further bolster our combined growth, allowing us to reach more customers more efficiently with our impressive turnkey space solutions. The WillScot Mobile Mini team has built a strong reputation as a highly respected leader in our sector, with a culture and core values that align with those of McGrath. McGrath brings capabilities and expertise that complement those of WillScot Mobile Mini, and will be central to their long-term growth plans and ambitions. Importantly, we share the aspiration to provide exceptional experiences for our customers and to be the workplace of choice for employees. For our shareholders, they will receive immediate cash value for their investment, where can receive shares in the combined company to benefit from the acquisition. This will enable us to benefit from the significant synergy potential and long-term value creation opportunity following the close of the transaction. I am committed to working closely with Brad and Tim in the coming months to ensure a smooth integration planning process and maximize the value inherent in this unique combination. Before I turn the call over, I'd be remiss not to highlight the incredibly talented McGrath team. Our success to date and this combination are testaments to the hard work of our colleagues across the company, which has allowed us to build and maintain such a strong market offering and deliver service and solutions that so many people count on each and every day. As we look to the close of the transaction and beyond, I am confident that our employees will thrive as part of this industry-leading platform. With that, I'll turn it over to Tim.

Thanks for that, Joe. Turning to Slide 6, I will summarize the transaction details. We've structured this transaction as a combination of cash and equity, whereby McGrath shareholders will receive either $123 in cash, or 2.8211 shares of WillScot Mobile Mini common stock for each share of McGrath common stock. Under the election and allocation procedures in the merger agreement, 60% of McGrath's outstanding shares will be converted into the cash consideration and 40% of McGrath's outstanding shares will be converted into the stock transaction -- or stock consideration. The transaction values McGrath at an enterprise value of $3.8 billion, including approximately $800 million of net debt. So based on the proration procedures, there will be $1.8 billion of total cash consideration or 60%, and $1.2 billion of stock consideration or 40%, plus the approximately $800 million of debt, which we will refinance at closing. The total per share consideration represents a premium of 10.1% to McGrath's closing stock price on January 26, 2024, before taking into account future value creation resulting from the substantial financial synergies between the 2 companies. McGrath's shareholders will participate in this value creation through a 12.6% ownership stake in the combined company, and McGrath shareholders will also benefit from a tax-free reorganization under IRC Section 368 for the stock portion of the merger consideration, preserving significant value. After the close of the transaction, Brad and I will work closely with Joe and the McGrath team to ensure a smooth transition for both our customers and employees and with the interests of our long-term shareholders in clear focus. We are initially estimating $50 million in annual operating synergies to be realized on a run rate basis within the first 24 months post-closing. While these are initial estimates, given our long track record of integrating acquisitions and successfully realizing synergies, we fully expect to realize incremental revenue synergies and capital efficiencies over time. And with approximately $700 million of combined free cash flow in 2025, we will be unconstrained in terms of our ability to reinvest in our business and unlock these opportunities. The financing for the transaction is fully underwritten and committed by our banking partners. Based on expected pro forma adjusted EBITDA of approximately $1.4 billion for the full year of 2023, expected net debt to adjusted EBITDA at close will be approximately 4.3x. And we expect to deleverage back below 3.5x within 12 months of closing, given the forward visibility we have into our cash flows. The transaction has been approved by all of the directors of both companies' boards and is expected to close in the second quarter of this year, following the receipt of regulatory approvals and approval by McGrath shareholders. And now I'll turn the call back over to Brad to provide a bit more detail on the complementary nature of McGrath's operations.

Thanks, Tim. Turning to Slide 7. I'll share why we feel confident of the McGrath business and its talented operating team will make such a meaningful addition to our company. McGrath has a strong track record of revenue growth and consistent adjusted EBITDA margins, with 2023 estimated revenues and adjusted EBITDA of $825 million and $316 million, respectively, at the midpoints of the Q3 guidance. They have built a tremendous business with an established culture of operating excellence. Like WillScot Mobile Mini today, McGrath also has limited customer concentration and the acquisition will improve our company's asset diversity so that we can better serve our customers. McGrath operates 2 distinct segments: TRS-RenTelco, which represents 20% of the revenues and Mobile Modular, which drives 80% of the revenues, providing portable storage solutions, along with the complementary fleet of modular office buildings and complexes, including classroom configuration, ground level offices and site-related services. Now turning to Slide 8. The Mobile Modular segment is their fastest-growing segment, and will fit seamlessly within our portfolio of space solutions. Mobile Modular's financial performance has been outstanding, with Q3 2023 LTM EBITDA margins of 36.4% and LTM revenues of $620 million. We believe that we can continue to optimize this segment's performance by enhancing operating efficiency, cross-selling across the portfolio, including access to our expansive modular and storage VAPS portfolio and our unique space solution offerings such as Flex, cold storage and many other innovative product offerings. And we intend to embrace the unique capabilities of Mobile Modular and the Enviroplex teams and scale them across our combined portfolio. TRS-RenTelco is McGrath's other segment, and will represent approximately 5% of our combined company revenues. It offers rentals and sales of general purpose and communication test equipment, domestically and abroad, to aerospace, defense, communications, manufacturing and semiconductor customer segments. While a different business, TRS-RenTelco has an outstanding financial profile in its own right, posting strong EBITDA margins of 58% and revenues of $155 million over the last 12 months. And we intend to support the business and ensure that it has dedicated resources to support its own growth strategy. I'll now pass it back to Tim to provide further details on the rationale behind this transaction.

Thanks, Brad. Moving to Slide 9. We're excited about the compelling strategic and financial benefits of this transaction, which we assessed in detail over the course of our due diligence process. This combination brings together 2 leading North American providers of turnkey space solutions. Importantly, WillScot Mobile Mini and McGrath are truly complementary businesses. Our teams and expertise, our product offering and our customer segments are each unique but fit together well, resulting in broader capabilities and enhanced service for our customers and stronger recurring revenue streams valued by our shareholders. Each company manages predictable leasing portfolios with long lease durations, which gives us significant visibility into the growth of our recurring revenue streams. On a combined basis, approximately 90% of our pro forma revenue will be derived from leasing and related services, which is fundamental to the consistency of our cash flows and our visibility into growth. The financial rationale underpinning this transaction is equally as compelling, when combined with our track record of integrating effectively and unlocking value for all stakeholders. As I mentioned previously, we have identified $50 million in pretax operating synergies, plus upside from revenue synergies from cross-selling and value-added products as well as potential balance sheet synergies. We expect to realize all of these over the next 2 years and beyond, which gives us confidence in the continued expansion of both margins and return on invested capital in our business. We expect the combined company to generate approximately $700 million in annual free cash flow in 2025 at approximately a 20% free cash flow margin, and we expect the combination will be accretive to earnings per share within the first 12 months post closing, with significant upside thereafter from revenue and commercial synergies. With this robust profitability, free cash generation and our strong balance sheet, we will continue to reinvest in our business using our established capital allocation framework to drive consistent compound returns to our shareholders over time.

Now turning to the next slide. I'd like to further hone in on how this combination will benefit our collective customers. This transaction will combine 2 complementary fleets that can be deployed across a larger combined customer base and expanded branch network. We'll operate a fleet of over 450,000 modular and portable storage rental units, representing over 160 million square foot of relocatable commercial space, with over 300 locations to provide innovative turnkey space solutions across our expanded customer base. This slide provides a great visual demonstration -- excuse me -- this slide provides a great visual demonstration of how this transaction strengthens our capabilities to serve customers throughout North America. McGrath's customers will now have access to our innovative portfolio of value-added products and services, and that's a portfolio that continues to expand. Optimizing our branch network through expanded density and our best-in-class technology platform will not only minimize growth capital expenditures, but also enhance operational efficiency. Our efficient utilization of the combined fleet will ensure a more streamlined operation, eliminating redundancies via fleet sharing, and we can even be more efficient with our refurbishments, increasing capital efficiency and reducing waste. Now let's turn to Slide 11 for a closer look at how the combined company's diversified customer segments and enhanced customer base, better positions the business to capitalize on significant long-term industrial tailwinds such as Onshoring/Reshoring and federal-funded infrastructure investments. McGrath's Mobile Modular segment serves a similarly fragmented customer base across largely complementary segments, in addition to providing further diversification. We aim to capitalize on this position to enhance our offering to education, government and health care customers, which together will represent 15% of our combined revenues. These customer segments are great examples, among many, where we see potential to further develop previously underpenetrated industry verticals over time.

Turning to Slide 12. On the right-hand side of the page, I'd like to remind our investors of how we've been reinvesting and redeploying capital within our business and executing our strategic levers to create value. Since our merger with Mobile Mini in 2020, we have effectively redeployed over $750 million of capital by divesting noncore assets and reinvesting in our core space solutions, where we have added tremendous value through our organic value creation levers. The addition of McGrath is simply a continuation of this strategy. And we've initially quantified the $50 million of operating synergies that we expect to execute across 3 broad categories detailed on the left-hand side of this page. The first is related to further in-sourcing and optimization of logistics and fleet maintenance spend by leveraging our combined in-house teams of drivers, technicians and skilled trades more efficiently. We believe this is at least a $10 million cost savings opportunity, primarily by reducing third-party spend. The second category is related to branch real estate opportunities, where we believe we can reduce real estate needs and associated operating costs for excess inventory across the combined network, which we believe is a $20 million cost savings opportunity. And lastly, we expect to realize other general and administrative savings of $20 million by reducing duplicative third-party spending on IT, marketing, insurance, professional fees and other categories, and leveraging our back office and IT infrastructure. While these operating synergies are readily identifiable, we are equally excited about other categories of opportunity that we expect to realize over time, including revenue synergies, capital expenditure efficiencies and other balance sheet and tax efficiencies, all of which we have realized in our past transactions. Turning to Page 13. I think everyone acknowledges the value-added products has been one of the fastest-growing and most profitable parts of our business for the last decade, and I expect will continue to be for years to come. We have successfully cross-sold VAPS into all of the customer portfolios that we have acquired historically, and we see the same opportunity within McGrath's customer base. McGrath has already begun this journey through its Mobile Modular Plus offering, and we believe we can accelerate this. We have approximately a $500 million organic growth opportunity in value-added products across our current modular and storage assets, before taking into account our cold storage and ClearSpan additions, and before taking into account the addition of McGrath. The addition of McGrath, we will significantly expand the addressable customer population for our value-added solutions that are already embraced by the market. Looking at the top right section of this slide, you can see that we've broken down the current value-added products penetration for both companies. Value-added products revenue penetration in our P&L is up to 30% through Q3 2023, while McGrath's is less than 10% currently. We expect these numbers to converge over time and grow towards our LTM delivered penetration of 40% and beyond as we progress towards our longer-term targets. In short, McGrath's modular and storage fleet represent a significant opportunity to drive additional VAPS revenue, which we can accelerate through our established playbook. And this is a great example of why we believe that we are the best owners and operators of modular and storage assets. Turning now to Slide 14. Our company has a proven track record of delivering profitable, predictable growth and value for our stockholders through strategic transactions and consistent application of our value levers. While the acquisition of McGrath marks an important milestone, it is simply a continuation of a strategy that has provided consistent growth and compound returns to shareholders over time. Since our public listing in 2017, we have grown top line revenue through both organic and inorganic investments by over 5x, growing adjusted EBITDA by over 8x, expanded adjusted EBITDA margin by over 1,700 basis points, transformed our free cash flow profile and increased return on invested capital by 1,200 basis points to 18%. All of this was accomplished while consistently managing our leverage down into our 3.0 to 3.5x target range and while returning more than $1.8 billion of capital to shareholders. This is an extraordinary track record of value creation, and McGrath fits our formula perfectly. This transaction accelerates and extends our growth, which will be reflected in our financial performance metrics. Using the same 2024 to 2026 Horizon that we forecasted at our last Investor Day, we are increasing our adjusted EBITDA margin range to 45% to 50%, and return on invested capital range to 15% to 20%, based on the milestones we've achieved thus far and our visibility into continued growth over the next 3 years. And we believe that we can achieve approximately $700 million of free cash flow in 2025, which in turn provides clear line of sight to free cash flow per share metrics at the top end of our original range. While there's certainly a lot of work to be done associated with the integration, it is work that our team knows well, and we welcome the opportunity to continue building out our unique platform and delivering sustainable growth and returns for our shareholders. On the next slide, I'd like to focus on our financing plan. Looking at the top left section of the slide, you can see the sources of funds for the transaction. We've received commitments from our banking partners to upsize our asset-backed revolver to $4.45 billion using its accordion feature. And we will draw $1.2 billion from that line while leaving ample capacity. We intend to issue approximately $1.5 billion of new senior notes, which we've penciled in to mature in 2029 and 2032, and which are fully underwritten by our banking partners in the form of bridge commitments. Lastly, we will issue $1.2 billion of equity directly to McGrath's shareholders per the allocation mechanics in the merger agreement. In terms of outlook, we expect pro forma net debt to adjusted EBITDA to be 4.3x our LTM March 2024 EBITDA, and we expect to delever to our target range of 3 to 3.5x within 12 months of our expected closing. I've said many times that we can delever by approximately 1 turn per year when we so choose. In this case, the combined company will benefit from highly predictable sources of top line growth, high probability operating synergies, predictable margin expansion levers and more efficient capital spending, all of which give us multiple pathways to hit our targets. And our highly flexible debt structure provides all of the capacity required to continue reinvesting in our business, while managing responsibly back into our target leverage range. We are extremely grateful to the institutions and individuals in our bank group, who are supporting us in the transaction and who believe in our plans. Lastly, on Slide 16, and before turning it back to Brad, I'd like to highlight that post close, our combined company will maintain the consistent application of our capital allocation framework as a mechanism to compound shareholder returns predictably over time. Our top priority over the next 12 months will be managing the business back into our target leverage range while continuing to invest organically. And with the addition of McGrath, over time, our capacity to generate cash, reinvest in our business and increase shareholder returns is significantly enhanced, and we're excited to start that journey with the McGrath team for the benefit of our combined shareholders. With that, I'll turn the call back over to Brad for some closing remarks.

Please turn to Slide 17. I'd first like to thank Tim and Joe for that great additional context. By far, our most important assets are our collective teams. Given the success of the McGrath business over the years and my time with Joe and Keith, I was not surprised to find that McGrath's key values are virtually the same as ours, both centered on our customers, our employees and our communities. Our combination will bring our employees, additional career opportunities and further extend our comprehensive offering of temporary space solutions to enhance the value that we can provide our customers across the combined footprint. I look forward to welcoming the McGrath team to our family very soon. Turning to Slide 18. In closing, the combination will further accelerate our growth to revenue, adjusted EBITDA and free cash flow, including the impacts of highly certain revenue and operating synergies based on our track record of substantial value creation through M&A. Our 1 billion of idiosyncratic growth levers remain in flight, many of which will increase proportionally with the close of the transaction, including the prospect of extending our innovative and expansive value-added products portfolio and our unique FLEX and cold storage and ClearSpan solutions to McGrath customers. Our long-term capital allocation framework remains unchanged as we continue to accelerate our robust organic growth with highly accretive M&A, all the while creating long-term value for our shareholders. This concludes our prepared remarks. I wish all of you listening today continued safety and good health. Operator, would you please open the line for questions.

[Operator Instructions] Our first question comes from the line of Scott Schneeberger with Oppenheimer.

Congratulations. Not surprising, but I guess my first question would be why now with this transaction? I think people have envisioned these 2 companies getting together at some point. But why now? And I think maybe a helpful add-on question here is after mod space about 5 or 6 years ago and now McGrath with its large modular mix, you're a very sizable percent of the modular business out there. Just maybe go back to mod space and how that easily went through regulatory process and maybe some discussion with that here, too.

Yes, Scott, this is Brad. I appreciate the question. Why now is it was the right time, both Boards believe this was an outstanding combination and felt like this was the time to take advantage of such. With respect to what we'll be with the combination of McGrath, we'll be the industry-leading space solutions provider. We're quite a bit different than the Williams Scotsman when we took public in 2017. We're with 10x or more market capital, our EBITDA profile, our revenue profile, our free cash flow profile, a completely different company. And it's really not a modular play or a storage play. This is a temporary space solutions provider, 160 million square foot of relocatable turnkey space. So we're very comfortable with the potential transaction and look forward to getting it closed in the second quarter of this year.

I obviously know McGrath pretty well. The TRS-Ren Telco business is a very good specialty rental business. It's actually a very high ROIC business. I see you increased the target for the firm on that, but I'm not sure how core you view that. So just kind of curious how that will be managed out of the gate as well as Enviroplex, which is a little bit of manufacturing capability and a little bit more full integration. Just curious how that fits in as well?

Scott, I'll start up with the Enviroplex question because we actually have small-scale manufacturing capabilities within our business today. We don't talk about them a lot. But if you think about any of our larger branches out in the network, we're executing thousands of refurbishments annually to restore and extend the useful lives of our fleet, and that is really no different than a manufacturing capability at the end of the day, although we direct it to support our leasing operations. Enviroplex is a very unique capability, very strong reputation, especially in the education sector. As I mentioned in my prepared remarks, leasing operations will be about 90% of our revenue post-closing, but we fully expect to maintain and build upon kind of the unique Enviroplex capabilities that McGrath has established over the years. As it relates to TRS-RenTelco, it's not a business we would have gone out and bought independent of the ability to partner with Mobile Modular and Enviroplex. But like everything, we're going to take our time to assess the operating synergies with the rest of the business. As Brad said in his remarks, we're going to ensure that, that team has dedicated resources with which to maximize its market potential, and we'll take it from there. So super excited about the entire combination and the components of the McGrath portfolio. They truly are complementary to what we're doing on the legacy WillScot Mobile Mini side of things and together, we'll be a much stronger platform.

Last one for me. McGrath is very well known for its education classroom assets, and that's a business WillScot's been in, in the past, many years ago. Just curious how you all are viewing that, going from less than 5% of your modular mix now to over 10%, just maybe addressing that.

Scott, Tim again, and Brad can elaborate. We like the diversification benefits, modest as they are, that McGrath brings to our portfolio. We love the education sector. We're rebuilding a big school on the island of Maui right now, which is incredibly exciting to support that community, and it's more a question about how you go to market. We like to do that with assets that are standardized and fungible across end markets and geographies. But there's also a position in the portfolio for dedicated sector-specific assets, and that 12% of our revenue, that's still a modest part of the overall portfolio, albeit providing some diversification benefits. And I just highlight that education is just one example of the different industry verticals, where we see opportunities to further penetrate with our solutions. And this is just the first example of one of those and more to come.

Yes. I'd just had Tim reference the project in Hawaii. That's a FLEX product being applied to the education market. And just as a reminder, Scott, we also own modern manufacturing up in Portland, Oregon, which does a terrific job producing buildings -- modular permanent buildings largely for education markets, which will be extremely complementary to the Enviroplex team.

Thanks, guys. I'll turn it over. Congratulations.

Our next question will come from the line of Seth Weber with Wells Fargo.

It's Seth Weber. I just wanted to ask, just on the delta between the EBITDA margins for McGrath around 36% and WillScot in the mid-40s. Do you think -- is that just purely a scale and a VAPS issue? Or is there anything else you could call out there, whether it's a customer mix or go-to-market strategy or pricing? Anything that you attribute the delta there to?

Seth, this is Tim. The only thing I would call out is the slightly higher mix of sale revenue in the McGrath portfolio, relative to leasing revenues that inherently comes at a lower EBITDA margin typically. But the big driver here is scale and scale benefits. And we've seen this across really every acquisition that we've executed over the course of the last almost 7 years now since going public. And that's one of the data points that gives us a very high degree of confidence in the synergy realization in this transaction.

Probably, the one thing I would add, the underpin to that scale, are our world-class systems. So we're running world-class ERP with SAP and salesforce.com, which really enables extracting those operating efficiencies.

Yes, that's a really good point. It's important to stress that nothing there from an IT infrastructure on the WillScot side needs to change to accommodate a transaction like this. We found a platform that our team has built and invested in over the last almost 4 years since merging with Mobile Mini is eminently scalable. And we made those investments with an eye towards building the business and an eye towards the future, and this is a nice validation of that.

Yes. That was actually my -- going to be my follow-up question just on the technology and the software and stuff. So let me -- maybe I'll pivot to a different question. Anything that we should be thinking about from a CapEx -- so do you envision your CapEx kind of coming much down quite a bit in 2024, 2025, just as you integrate the acquired assets? Or how should we think about your appetite to buy more units here?

Yes, Seth, we quantified $50 million of kind of hard cost or operating synergies. We fully expect there will be capital expenditure synergies here between the 2 businesses. Obviously, WillScot's operating at a lower utilization level currently, so there is idle inventory with which we can distribute across McGrath sales organization and branch network, and that will naturally defer some capital spending across the 2 businesses. We haven't quantified it precisely yet. And as you know, it's always demand-driven anyway, right? But on an all else equal basis, yes, we fully expect that the combined CapEx profile of the 2 businesses will improve.

Got it.

Our next question will come from the line of Andrew Wittmann with Baird.

Yes. Great. I guess my first question was around the tax savings or tax shields that you guys have inherent in this business model. And specifically, I think when you've done acquisitions in the past where you can, you like to do an asset purchase, and I believe that allows you to step up your asset bases and extend the NOL that you have attached to this business. I was wondering if that concept is applicable here in a public company setting and also just as an addendum to that, Tim, if you could just talk about the IRC benefit that you have that you mentioned, I guess for some of us who are not as well skilled at understanding what that is, is that basically say that you don't recognize a gain on the stock portion of the deal? Or maybe if you could just translate that to English for us?

Yes, we'll start with that piece, and I would recommend everybody that they consult their tax advisers. But no, that just allows the deferral of capital gains tax for the recipient of stock consideration, if you are a McGrath shareholder, and that's all I'm going to attempt to say on that topic. So again, check with your advisers on that. Your first question, as it relates to tax benefits of the transaction, we haven't quantified meaningful tax advantages from this. McGrath did largely inherit a $160 million NOL from its acquisition of Vesta about 12 months ago, so there will be some benefit in terms of extending the consumption of our NOL. We expect by virtue of bringing that attribute over to our balance sheet. However, we have not assumed in our cash flow projections, further benefits related to the step-up in the assets of acquired rental fleet.

Okay. That's helpful. And then, I guess, I wanted to drill in a little bit on the VAPS opportunity that you have. This is something obviously, your customers have really valued and participating with your company. And obviously, the Modular Plus solution is gaining traction there. You gave some detail, but I was just wondering, just on a dollar basis, Tim, if you've got any bookends that we should be thinking about there in terms of the VAPS opportunity. This 10% to 30% and eventually the 40% on the LTM that you guys talked about is helpful, but I didn't know if you had a dollar equivalent of that opportunity?

Yes. And we're still quantifying. We obviously haven't shared detailed customer information and things of that nature at this stage in the transaction. Through our diligence, we believe Mobile Modular Plus is generating north of $20 million of annual revenue, so that will help you kind of quantify the current value of that 10% metric. And obviously, our sites are set north of 40% over time.

Okay. That's super helpful. And then just one quick technical question is, I don't know if you've looked at the cost to achieve any of your synergies. If you'd be willing to comment on that?

Yes. We have looked at it in detail, as we always do and expect it will be about $35 million of cash cost, mostly recognized over the first 18 months post-closing. Although to the extent there are lease breakages or movements across the real estate footprint, some of those costs may linger beyond that 18-month period.

Our next question will come from the line of Manav Patnaik with Barclays.

Just on -- could you just give us the latest share numbers that you guys had in both modular and storage, both for WillScot and McGrath and if you anticipate obviously, any HSR scrutiny there?