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Bowing to shareholder pressure, the owner of TruGreen Lawn Care, Terminix pest control and Merry Maids cleaning service announced a deal with an investment group led by private equity firm Clayton, Dubilier & Rice Inc.
The announcement came nearly five months after the Downers Grove, Ill.-based company said it was exploring strategic alternatives.
ServiceMaster's board has approved the acquisition. Its stockholders will vote on the transaction at a special meeting expected to be held in the second or third quarter.
Once the deal is complete, Clayton operating partner George W. Tamke will become ServiceMaster's chairman, replacing Patrick Spainhour, who will stay on as ServiceMaster's chief executive.
Clayton CEO Donald Gogel said his firm had been eyeing ServiceMaster for years.
"We believe the company will be better positioned as a nonpublic enterprise to pursue management's long-term growth plans and to further enhance its attractive collection of market-leading service businesses," he said in a statement.
The Downers Grove-based company, tinged with Christian tradition, lists as its top corporate objective to "honor God in all that we do."
"Their plan is to work with the ServiceMaster team to accelerate growth in each business unit while maintaining a strong emphasis on the values that have been the core of the company," said Spainhour.
Since 2004, ServiceMaster's net income has fallen nearly 49 percent to $169.7 million in 2006, even as its revenue climbed nearly 12 percent. During the quarter ending Dec. 31, the company earned $38.9 million, a 44 percent increase from the same period in 2005.
The company is closing its Downers Grove headquarters and relocating its operations to Memphis, Tenn., where many of its subsidiaries are based. The move is expected to be complete by November.
In 2006, ServiceMaster had 32,000 employees and a network of 5,500 company-owned and franchise locations.
"To us, ServiceMaster is the perfect private equity holding," Sam Darkatsh, an analyst with Raymond James & Associates Inc., wrote in a research note Monday. "Huge, low-risk cash flows, the ability to roll up a fragmented industry and/or sell existing business lines, no Asian import or technological obsolescence risk, terrific brand names, and large (read: deep-pocketed) strategic players who could ultimately present an end game (or IPO, of course)."
ServiceMaster shares climbed $1.68, or 12 percent, to close at $15.15 Monday on the New York Stock Exchange.
