ICS Magazine

ServiceMaster Agrees to $4.7 billion Leveraged Buyout

March 21, 2007

LONDON -- Clayton, Dubilier & Rice, the U.S. buyout firm, agreed Monday to pay $4.7 billion for ServiceMaster, the owner of the TruGreen landscaping business and Terminix pest control.

Clayton Dubilier will pay $15.63 a share in cash for the company, 16 percent more than the closing price Friday, ServiceMaster said. Including debt, the deal values the company at $5.5 billion.

Clayton Dubilier will gain brands including American Home Shield and Merry Maids as well as a network of more than 5,500 sites offering services spanning termite extermination, carpet cleaning and landscaping.

"It's a good deal for them and it's a full price for a company that has had challenges growing," said Jim Barrett, an analyst with CL King & Associates in New York. "They have ubiquitous service brands, but consumers don't view them as superior."

Shares of ServiceMaster, based in Downers Grove, Illinois, rose $1.68, or 12.5 percent, to close at $15.15 on Monday in New York. The stock had declined 2.4 percent since the end of 2001.

"This has been a company that has struggled over the past five years as a public company, and our intent is to invest in the long term," Rick Schnall, the Clayton Dubilier partner who oversaw the deal, said. "The biggest businesses are in a cultural transition and that's going to take some spending."

Founded as a moth-proofing company in 1929, ServiceMaster is in the midst of shifting the approach for its TruGreen businesses to an on-the- street sales force from telephone sales, Schnall said.

Clayton Dubilier recruits executives who have run companies to be operating partners and help with investments. The firm will install George Tamke, an operating partner who worked on Clayton Dubilier's takeover of Kinko's, as chairman of ServiceMaster and will appoint at least two members to the ServiceMaster board. J.Patrick Spainhour will stay as the ServiceMaster chief executive.