Investment group to buy ServiceMaster

TruGreen and Terminix are part of the company being acquired.
CHICAGO (AP) -- Lawn care and pest control provider ServiceMaster Co. agreed Monday to be bought by an investment group in a cash deal valued at 4.5 billion, as the company tries to recover from years of declining financial results.
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 & amp; Rice Inc.
The announcement came nearly five months after the Downers Grove, Ill.-based company said it was exploring strategic alternatives.
The move followed pressure from shareholders Ariel Capital Management LLC and Newcastle Capital Management LP to consider a sale or buyout.
Under terms of the agreement, ServiceMaster stockholders will receive 15.625 in cash for each outstanding share, which is a 16 percent premium over ServiceMaster's closing price Friday of 13.47 on the New York Stock Exchange.
Clayton also will assume about 1.02 billion in debt.
The deal represents a premium of roughly 31 percent above ServiceMaster's closing stock price of 11.90 on Nov. 27, the last trading day before the company said it would explore strategic alternatives.
Stockholders to vote
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.