Top 40 distributor Cintas (asi/162167) announced Tuesday, August 16, that it will acquire uniform rental company G&K Services (asi/199845) for $2.2 billion. Upon completion of the merger, G&K Services will be a wholly owned subsidiary of Cintas, and will initially operate under the G&K brand name.
“Cintas’ management team and board of directors have a deep level of respect for G&K Services, its long and impressive heritage and its employees,” said Scott D. Farmer, Cintas CEO, in a statement. “Our companies share a dedication to customers, employees-partners and shareholders, which will build a great foundation for a successful combination.”
Cintas reports it will purchase G&K Services’ outstanding shares for $97.50 per share in cash.
Minnetonka, MN-based G&K Services is a branded uniform and facility services company serving more than 170,000 customers in the U.S. and Canada. Its annual revenue is approximately $1 billion. For its fiscal fourth quarter, G&K profits increased 20% to $19.8 billion, while revenue increased 9% to $258.5 million.
“This is a compelling transaction that delivers substantial and immediate cash value to our shareholders and expands options for our customers going forward,” said Douglas A. Milroy, chairman and CEO of G&K Services, in a statement. “We believe the combination has strong strategic logic and creates the right partnership to meet the evolving needs of our customers. In addition, a larger, more diversified company offers employee opportunities as well.”
The companies say the acquisition, expected to be complete in four to six months, will allow them to serve more than 1 million customers. After the announcement on August 16, Cintas shares gained 5% and G&K shares jumped 17%. This continues an upward trend for both companies: Cintas stocks rose 24% in 2016 while G&K increased 53% in the same time period.
While both companies’ boards of directors have approved the transaction, it is still subject to approval by the holders of G&K Services common stock and other customary closing conditions.
Cintas reported that the merger will result in annual savings from $130 million to $140 million. As a distributor of promotional products, Cintas ranks ninth on Counselor’s list of top 40 distributors, with estimated 2015 sales of $158.5 million.