Roark Capital to Acquire ServiceMaster Brands
ServiceMaster Global Holdings has concluded an agreement to sell its ServiceMaster Brands franchise business to an affiliate company of Roark Capital for US $1.553 billion.
The transaction is expected to close in approximately 30 to 60 days, subject to customary legal and regulatory closing conditions.
The transaction will position the company’s two businesses, Terminix and ServiceMaster Brands, to pursue their own distinct strategies and growth opportunities. Terminix will benefit from enhanced management focus and resources for its global pest control business, while Roark Capital will provide ServiceMaster Brands with a strong and supportive owner to build upon its leading market positions and trusted brand names.
ServiceMaster Brands includes a portfolio of residential and commercial services brands such as ServiceMaster Restore, ServiceMaster Clean, Merry Maids, AmeriSpec, and Furniture Medic, which operate through a network of franchised and company-owned businesses that generated $2,663 million in system-wide sales, and $256 million in revenue for the twelve-month period ended June 30, 2020.
Announcing the agreement, said ServiceMaster Chairman and interim CEO, Naren Gursahaney, said: "This transaction represents a tremendous outcome for the stakeholders of both of our businesses.
"Through this divestiture, Terminix will become a pure-play, global pest control company, better positioned for the future. We look forward to continuing to advance our commitment to predictable, sustainable growth and profitability at Terminix through the cultural and operational transformation of the business that is underway and remain focused on driving enhanced value for our shareholders, customers and employees.
"ServiceMaster Brands is the largest franchisor in commercial and residential services with over $2.6 billion in system-wide sales in the large and growing restoration and health-based cleaning services industries. With a resilient market position, trusted brand names, and exciting new growth strategies, the business and its experienced teams and franchisees are well-positioned for strong long-term growth. Roark Capital has a strong track record of supporting franchisees and dedicating substantial resources to growing need-based services businesses, and we are confident that ServiceMaster Brands has a bright future ahead."
Mike Thompson, Roark Capital managing director, added: "We are thrilled to welcome ServiceMaster Brands to our family.
"We are excited to partner with the team and support ServiceMaster Brands’ long-tenured and successful franchisees to realize the tremendous growth potential of these brands."
ServiceMaster anticipates net proceeds of over $1.1 billion from the divestiture after paying approximately $420 million in taxes. The remaining proceeds, net of fees, will be earmarked for reduction of debt to achieve its target leverage ratio of between 2.5 and 3.0 times Adjusted EBITDA, continued investment in its core pest control and termite businesses to drive organic growth and productivity, accretive acquisitions to further strengthen its businesses, and continued ongoing returns to shareholders.
On completion of the disposal, ServiceMaster Global Holdings is expected to rebrand as Terminix.
Lazard served as financial advisor to ServiceMaster, and Wachtell, Lipton, Rosen & Katz served as ServiceMaster’s legal advisor on the transaction.
J.P. Morgan served as financial advisor to Roark Capital, Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal advisor on the transaction, and Barclays provided financing for the transaction.
Third Quarter 2020 Outlook
ServiceMaster Global has affirmed previous guidance relating to its its third-quarter revenue for 2020 and expects its continuing operations to generate between $495 million and $515 million of revenue. Third-quarter 2020 continuing operations Adjusted EBITDA guidance is affirmed between $80 million and $90 million. Third-quarter 2020 ServiceMaster Brands revenue guidance is affirmed between $63 million and $68 million. Third-quarter 2020 ServiceMaster Brands Adjusted EBITDA guidance is affirmed between $23 million and $27 million.