Lawn care service and pest control provider ServiceMaster Co. bowed to shareholder pressure Monday and agreed to be bought by an investment group lead by private equity firm Clayton, Dubilier & Rice Inc. in a cash deal valued at $4.5 billion.
The owner of TruGreen Lawn Care, Terminix pest control and Merry Maids cleaning service, announced the deal nearly five months after the Downers Grove company announced it was exploring strategic alternatives.
The move followed pressure from later shareholders Ariel Capital Management LLC and Newcastle Capital Management LP to consider a sale or buyout.
The buyout group will also assume about $1.02 billion in debt.
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.
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.
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 quarter.
“The board’s support is based on the conviction that this transaction will deliver value to shareholders that is superior to what the company could achieve under its current business plan,” J. Patrick Spainhour, ServiceMaster’s chairman and chief executive, said in a statement.
Once the deal is complete, Clayton operating partner George W. Tamke will become ServiceMaster’s chairman, replacing Spainhour, who will stay on as ServiceMaster’s chief executive.
The Downers Grove-based company, tinged with Christian tradition, lists as its top corporate objective to “honor God in all that we do.”
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. Move expected to be complete by November.
In 2006, ServiceMaster had 32,000 employees and a network of 5,500 company-owned and franchise locations.