By Aby Jose Koilparambil and Yadarisa Shabong
(Reuters) -UK equipment rental firm Ashtead is proposing to move its primary listing to New York from London, it said on Tuesday, as it also warned of lower-than-expected annual profit due to a weak commercial construction market in the United States.
Shares in the FTSE 100 firm fell 8% in early trade.
Ashtead, which makes most of its profits in the U.S., said it would discuss the New York listing proposal with shareholders and expects the plan to be implemented in the next 12-18 months.
The British firm joins a growing list of companies that are moving away from European listings in favour of U.S. markets, where valuations could be higher.
“It is obviously going to be a blow (for London), and it is almost as if it is a ripple effect where one company sees what has occurred for another and the benefits that they have had on valuation,” said Morningstar analyst Matthew Donen.
Ashtead said it has considered several factors including increased exposure to U.S. investors through a primary U.S. listing. It would retain a UK listing in the international companies segment.
The group, which rents out equipment in the construction, repair, entertainment and emergency response segments, is the second-largest equipment rental company in the U.S. with 1,215 stores in all 50 states. The region accounts for 86% share of its revenue.
Ashtead said its half-year pre-tax profit fell 4% to $1.26 billion, slightly below a company-compiled analysts’ consensus estimate of $1.29 billion, hurt by lower used-equipment sales amid weakness in commercial construction market in North America.
“The local construction markets have been affected by the prolonged higher interest rate environment,” CEO Brendan Horgan said in a statement, adding that he expects it to recover as rates stabilise.
Ashtead also announced a $1.5 billion stock buyback.
“We do expect a Trump presidency to cause a significant increase in commercial U.S. construction spending, which will obviously support Ashtead, and that is being driven by an America first rhetoric, which is moving production back to the U.S.,” said Morningstar’s Donen.
Founded in England in 1947, Ashtead has been listed in London since December 1986 and made inroads into the United States with the acquisition of Sunbelt Rentals in 1990. In the early 2000s, it made several deals in the U.S. to become one of the largest equipment rental firms there.
United Rentals, the No.1 player in the U.S., has a market value of about $54.85 billion, compared with Ashtead’s nearly $35 billion valuation as of Monday’s closing prices.
(Reporting by Aby Jose Koilparambil and Yadarisa Shabong in Bengaluru; editing by Savio D’Souza, Jason Neely and Susan Fenton)
