Feb 19 (Reuters) - Machinery rentals firm Herc Holdings ( HRI )

has signed a deal to buy H&E Equipment Services ( HEES )

for $3.83 billion, excluding debt, after H&E terminated its

merger agreement with United Rentals ( URI ), the companies said

on Wednesday.

The cash and stock deal will combine the world's third- and

fifth-largest firms that rent out machinery for construction

sites.

United Rentals ( URI ), which had entered into an agreement to buy

H&E last month, later dropped out. Following H&E's previous

agreement with United Rentals ( URI ), Herc ( HRI ) paid a termination fee of

$63.52 million to United Rentals ( URI ) on behalf of H&E.

The buyout comes at a time when equipment rental demand is

rising, as contractors find it more cost-effective to rent items

such as pumps and air conditioning for their construction sites,

rather than owning them.

H&E's shareholders will own about 14.1% of the combined

company after the deal's completion, according to the terms.

Herc's ( HRI ) offer of $78.75 in cash and 0.1287 shares of Herc ( HRI )

common stock for each H&E share represents a premium of nearly

20% to the stock's last close on Friday.

The transaction was valued at $5.3 billion, including about

$1.5 billion in debt, compared to United Rentals' ( URI ) $4.8 billion

bid, which included debt.

The merged company is expected to gain around $300 million

in annual EBITDA (earnings before interest, taxes, depreciation

and amortization) synergies within three years of the deal being

finalized.

The transaction is expected to close by mid-2025.

Founded in 1961, H&E provides a rental fleet including

aerial work platforms, earthmoving equipment, material handling

equipment and other general and specialty lines.