Aramark OKs $6.3B Offer to Go Private

By Theresa Howard

NEW YORK — Aramark, the USA’s No.3 food-service company in revenue, is going private, again.

The board on Tuesday approved a $6.3billion deal to sell Aramark to CEO Joseph Neubauer, 65, and a consortium of private equity groups including GS Capital Partners, CCMP Capital Advisors, JPMorgan Partners, Thomas Lee Partners and Warburg Pincus.

Neubauer said he would contribute up to $250million to the buyout.

The group will get a company with food and beverage contracts for thousands of venues nationwide including executive suites, prisons, schools, hospitals and stadiums.

The agreement to pay $33.80 in cash for each Aramark share tops the group’s $32 offer in May. That represented a 20% premium over the closing price the day before they made the initial bid.

As part of the deal, the group will assume about $2 billion in debt. The transaction is expected to close by early 2007 if it is cleared by federal regulators and shareholders. Although Neubauer owns 41% of Aramark’s stock, he agreed to have his voting power restricted to 5% of the total.

By going private, Aramark can try to revive the business without worrying about Wall Street. The company warned last month that its profit for the quarter that ended in June, which it will report today, would be about half of what analysts expected.

“You have more flexibility when you are out of the public marketplace,” says Fentress Seagroves, a partner in PricewaterhouseCooper’s private services practice. “You don’t have to be beholden to the quarterly earnings pressures.”

Aramark, which generated $10.9 billion in revenue last year, would be the sixth-largest U.S. company bought this year by private equity investors. Private equity firms have spent $205 billion so far in 2006, up 700% since 2001, according to financial research firm Dealogic.

“Everybody is going private,” says Jay Anand, a professor of corporate strategy at Fisher College of Business at Ohio State University. “Money is being poured into private equity. At the top end it’s performed well.” The stock market, he says, “hasn’t been performing that well.”

In 1984 Neubauer took the company private, in a management buyout, in response to a hostile takeover bid. It went public again in 2001.

He said in a statement that the group of private equity firms are “committed to working with us in building long-term solutions that deliver the most value for our clients and customers.”

Aramark shares closed at $32.58, down 47 cents.

(c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.