ServiceMaster Attracts Eyes of Buyout Firms
Private-equity firms are circling ServiceMaster Co., a $3.2 billion company that has weaved a religion-based business ethos through its home-services outlets.
Although ServiceMaster doesn't have a process for fielding buyout inquiries, some on Wall Street are openly talking about ServiceMaster as being "in play." Buyout firms' interest, coupled with some behind-the-scenes shareholder unrest, could push the company to make some major changes in the months ahead. At least some people following ServiceMaster suggest that a management-led buyout of the Downers Grove, Ill.-based company is another possibility.
ServiceMaster is the kind of business that private-equity firms love -- generating plenty of cash with minimal capital expenditures required. ServiceMaster owns and franchises local Terminix pest control outlets, TruGreen lawn service, and MerryMaids housecleaning businesses -- some 5,500 individual locations in all. Over the past 12 months, the company generated nearly $400 million in earnings before interest, taxes, depreciation and amortization, on sales of $3.4 billion. At the same time it spent just $47 million on capital improvements.
A company spokesman declined to comment, saying that he didn't discuss market rumors. Clues about the company's future could come at a presentation to investors in New York later this month.
Any buyout offers, or other corporate changes, could push up the stock price, which has been languishing lately. At $11.28 on the New York Stock Exchange yesterday, the shares are down about 5% during 2006, compared with a 12% gain in the Standard & Poor's 500-stock index. Over the past five years, the shares declined about 4%, compared with a nearly 24% gain for other services companies tracked by data provider Baseline.
ServiceMaster represents an intriguing takeover target. Its cash flows are especially attractive to buyout firms, who use a company's cash flows to pay down the debt used to purchase it. Still, its culture may make some buyout firms uncomfortable. There is an 11-foot statue of Jesus washing the feet of a disciple at its headquarters, and "honor[ing] God in all we do" is its first corporate objective.
For all the attraction of its business model, ServiceMaster has continued to struggle. Some wonder if the company can continue growing at its previous pace. Last month, ServiceMaster said it would miss its predictions for third-quarter and full-year results. It said an excessively warm summer hurt its lawn-care businesses and falling sales of existing homes decreased demand for home-services contracts. Fewer termite infestations also reduced its Terminix business.
From 1970 through 1998, earnings grew at a compound annual rate of 20% and revenue at 19%, according to Matthew Litfin, an analyst with William Blair & Co. Lately, the company hasn't met expectations of growth in the low double-digits.
In 1999 earnings declined, as the company faced shrinking profits at units that served institutions, like schools and hospitals, and slowing sales growth in its lawn-care business. Also constraining growth have been recent government restrictions on telemarketing, which used to be a big emphasis for the company.
ServiceMaster has attracted the attention of Ariel Capital Management, an investment-management firm that has built up a greater than 10% stake in the company. Ariel has voiced frustration with the company's performance, people familiar with the matter said. An Ariel spokesman declined to comment.
Last year Scotts Miracle-Gro Co. expressed a desire to purchase ServiceMaster but was rejected, according to people familiar with the matter. A Scotts spokesman declined to comment.
Alexander Paris Jr., director of research at Chicago-based Barrington Research Associates Inc., says a buyout is plausible. "It's still a good company with a lot of good brands that really hasn't been performing well," he says. "It's not as if earnings are crashing. They're just not growing."
He adds: "If they're not going to use their stock to make acquisitions, and they're able to fund their growth through internally generated cash, what do you need to be public for?"
ServiceMaster has its roots in a moth-proofing business started in 1929. It later expanded into rug cleaning and then managing housekeeping staff for hospitals. The founder, an evangelical Protestant and subsequent leaders have incorporated what it calls a "values-based" element to the company.
As the company weighs its future, it raises a question for investors: Can the company put itself on the block and still keep its religious culture? Though the board meetings still start off with a prayer, says Mr. Paris, "It's not like it once was. It's less Christian than it used to be."
As a publicly traded firm, ServiceMaster would have to take the highest offer on the table -- an offer that may or may not come from a buyer friendly to its tradition. Those facts might suggest that a straight-ahead auction may not be the path it pursues.
私人资本运营公司盯上ServiceMaster
私人资本运营公司已经将目光瞄向了市值32亿美元的家政服务类公司ServiceMaster Co。
尽管ServiceMaster尚未收到任何收购要约，但华尔街部分人士在公开谈论ServiceMaster时就好像它已经成为了收购目标一样。买家的兴趣，加之一些幕后股东的不满，可能推动该公司在今后几个月中发生重大变化。一些研究ServiceMaster的人认为，这家公司还存在管理层收购的可能。
ServiceMaster正是私人资本运营公司青睐的那类企业──产生大量现金，而资本支出却所需甚少。ServiceMaster旗下有Terminix杀虫店、TruGreen草坪维护公司以及MerryMaids保洁公司──服务网点数量总共5,500个。在过去1年中，该公司的利息、税项、折旧、摊销前收益接近4亿美元，销售额为34亿美元。而同期的资本支出仅为4,700万美元。
该公司发言人拒绝置评，称不对市场传言发表意见。该公司未来的一些前景可以从本月底在纽约举行的投资者会议上找到部分线索。
任何收购要约，或是其它公司方面的变动都可能推高股价。该股最近一直徘徊不前。周二ServiceMaster股票收于11.28美元，今年以来累计下跌了5%左右，而同期标准普尔500指数上涨了12%。在过去5年中，该股下跌了约4%，而数据提供商Baseline跟踪的其他服务类公司同期上涨了近24%。
ServiceMaster算得上是颇具诱惑力的收购目标。其现金流对收购企业尤具吸引力，他们可以用该公司创造的现金流偿还收购欠下的债务。不过，ServiceMaster的企业文化可能会令一些收购企业感到不适应。在其总部，有一尊11英尺高、描述耶稣给一位门徒洗脚的雕像，而“将所有的荣耀与成就都归功于主”在其企业宗旨中排在第一位。
尽管商业模式颇具吸引力，但ServiceMaster仍在困境中挣扎。一些人怀疑该公司能否按照以前的速度继续增长。上个月，ServiceMaster表示，难以实现第三财政季度和全年的收益预期。公司称，异常炎热的夏季打击了草坪护理业务，成屋销售的下降也使房屋服务合约的需求减少。蚁害减少也降低了Terminix业务的收入。
William Blair & Co.分析师马修?利蒂芬(Matthew Litfin)称，从1970至1998年间，该公司收益复合年增长率为20%，收入复合年增长率为19%。而近期，ServiceMaster一直未能达到10%-13%的增长率预期。
1999年，公司收益出现下降，公司那些面向学校和医院等机构的部门利润减少，草坪护理业务的销售增幅也开始减缓。限制增长势头的还有最近政府对电话营销的控制，而这过去一直是公司的重要营销方式。
ServiceMaster曾吸引了投资管理公司Ariel Capital Management的关注。后者买进了该公司10%以上的股份。知情人士表示，Ariel曾对ServiceMaster的业绩表示不满。Ariel的发言人不予置评。
据知情人士透露，去年Scotts Miracle-Gro Co.曾表示有意收购ServiceMaster，但遭到了拒绝。Scotts的发言人对此不予置评。
芝加哥Barrington Research Associates Inc.的研究主管亚历山大?帕里斯(Alexander Paris)说，存在收购的可能性。他说，这仍是一家优秀的公司，拥有很多目前表现不好、但仍算得上不错的品牌。该公司的收益不太可能大幅下降，只是不再增长而已。
他还说，如果它们不想用股票进行收购，而且能够通过内部创造现金推动增长，有什么必要上市呢。
ServiceMaster在1929年从防蛀处理起家，后来将业务扩大到地毯清洗，接着开始为医院管理保洁员工。其创始人是一位虔诚的新教徒，他和后来的领导者都将“基于价值”的要素同公司结合到一起。
在公司考虑自身未来的时候，也给投资者提出了一个问题：该公司能否在拍卖自己的同时又保持自身的宗教文化？尽管董事会会议仍是以祈祷开始，但帕里斯说，这同以前已经有所不同。其中的宗教色彩不如以往了。
作为一家上市企业，ServiceMaster可能不得不接受最高的收购报价──而这可能是、也可能不是欣赏其传统的买家提出的报价。这些事实可能表明，标准的拍卖可能不是它所追求的方式。
Dennis K. Berman / Ilan Brat
