Cerberus, United Rentals fight escalates

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NEW YORK (Reuters) - A fight between buyout firm Cerberus Capital Management and equipment rental company United Rentals Inc <URI.N>, escalated on Wednesday as Cerberus sought to force United Rentals to honor terms it says it made at the time a takeover deal was struck in July.

By Megan Davies

NEW YORK (Reuters) - A fight between buyout firm Cerberus Capital Management and equipment rental company United Rentals Inc <URI.N>, escalated on Wednesday as Cerberus sought to force United Rentals to honor terms it says it made at the time a takeover deal was struck in July.

Cerberus pulled its takeover offer for United Rentals of $34.50 per share, or $4 billion, last Wednesday.

United Rentals said on Monday that it filed a lawsuit in Delaware Court seeking to force Cerberus to complete the deal.

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Cerberus said in a statement on Wednesday that it filed an action for a declaratory judgment against United Rentals in New York State Supreme Court seeking "to ensure that United Rentals honors" undertakings made at the time of the deal. The buyout firm says that agreement caps its liability at $100 million.

United Rentals on Wednesday fought back. "Cerberus' attempt to pay the $100 million reverse break-up fee and simply walk away is a direct violation of the merger agreement," said a spokesman in an e-mailed statement. "We want the merger agreement enforced and we want it enforced in its entirety."

Shares of United Rental closed up 2 percent at $22.47 on Wednesday.

Taking center stage in United Rentals' legal case is a clause in the merger agreement known as "specific performance," which the company says gives it the right to force Cerberus to complete the deal at the original price.

The company also argues the clause gives United Rentals, and not Cerberus, the right to end the agreement.

RAM Holdings Inc, the Cerberus acquisition vehicle for the deal, has said its liability is limited to the $100 million break-up fee, which it has offered to the company.

The battle between the company and the private equity firm comes as several leveraged buyouts have collapsed recently, with buyers and banks feeling the heat from the weakening debt and credit markets, as well as a cloudy economic picture.

(Additional reporting by Michael Flaherty; editing by Carol Bishopric and Andre Grenon)