Cerberus Capital Management won a big legal victory on Friday when a Delaware court ruled that the US private equity firm was not obliged to close the $6.6bn takeover of United Rentals, an equipment leasing company.

Cerberus walked away from the deal in the wake of the credit squeeze, claiming it had the right to scrap the agreement as long as it was willing to pay a $100m break-up fee. But United Rentals believed that it had a right to “specific performance”, which would have required Cerberus to close the transaction against its will.

Signed in July, the buy-out of United Rentals by Cerberus is one of a handful of private equity deals signed during healthier times in the credit markets that have become the subject of legal disputes. The other large case that is expected to go to trial is one pitting Sallie Mae, the embattled student lender, against a consortium including JC Flowers, Friedman Fleischer & Lowe, JPMorgan and Bank of America.

In his ruling in favour of Cerberus, chancellor William Chandler wrote: “One may plausibly upbraid Cerberus for walking away from this deal, for favouring their lenders over their targets, or for suboptimal contract editing, but one cannot reasonably criticise the firm for a failure to represent its understanding of the limitations on remedies provided by this merger agreement.”

United Rentals shares tumbled 17 per cent to $17.91 in late trading on Friday, following the ruling. The Connecticut-based company said: ”While we are disappointed by chancellor Chandler’s decision, we respect it and thank the court for its prompt review of this matter. The board of directors and management team of United Rentals will consider its alternatives under the circumstances and they continue to believe strongly in United Rentals’ future prospects”.

The ruling is likely to be viewed as personally gratifying for Stephen Feinberg, Cerberus chief executive, who testified in defence of his firm’s right to withdraw from the deal. Pulling out of takeovers is seen as particularly damaging to the reputation of buy-out firms because it may hamper their credibility when negotiating deals with boards of other companies.

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