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Cintas (CTAS) to Acquire G&K Services to Foster Growth
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Redefining the industry dynamics, business services provider Cintas Corporation (CTAS - Free Report) recently inked a definitive agreement to acquire rival G&K Services Inc. (GK - Free Report) to fuel its growth momentum. The transaction is expected to be completed within the next four to six months, subject to the fulfillment of mandatory closing conditions and regulatory approvals. However, judging by the share price appreciation of both the companies (Cintas up 5.2%, G&K up 17.7%) post the announcement of the deal, it appears that investors are bullish on it.
According to the terms of the agreement, Cintas would acquire all the outstanding shares of G&K for $97.50 per share, which represents a premium of about 19% to its closing price on Aug 15. The transaction equates to total enterprise value of approximately $2.2 billion, including acquired net debt.
Headquartered in Minneapolis, MN, G&K operates as a branded uniform and facility services program provider in the U.S. and Canada. With over 8,000 employees serving customers from 165 facilities in North America, it reported annual revenues of $950 million last year.
Post acquisition, G&K would operate as a wholly-owned subsidiary of Cintas and is likely to retain its existing brand name. The combined company is likely to cater to over one billion business customers with an extended product portfolio and additional processing capacity. Customer service is also likely to improve with increased route density.
The synergies from the combined operations are likely to yield $130 million to $140 million in cost savings and the transaction is anticipated to be accretive to Cintas’ earnings from the second year of its operation.
Cintas had earlier offered an initial guidance for fiscal 2017 on the back of solid fourth-quarter fiscal 2016 results. The company expects fiscal 2017 revenues in the range of $5.150 billion to $5.225 billion, up 5–6.5% year over year. Earnings from continuing operations are expected to be within $4.35–$4.45 per share, which represents a year-over-year improvement of 6.4–8.8%. The guidance is likely to be revised up in the imminent future and looks quite enterprising for the investors.
Cintas currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include CRA International Inc. (CRAI - Free Report) and CBIZ, Inc. (CBZ - Free Report) , both carrying a Zacks Rank #2 (Buy).
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Cintas (CTAS) to Acquire G&K Services to Foster Growth
Redefining the industry dynamics, business services provider Cintas Corporation (CTAS - Free Report) recently inked a definitive agreement to acquire rival G&K Services Inc. (GK - Free Report) to fuel its growth momentum. The transaction is expected to be completed within the next four to six months, subject to the fulfillment of mandatory closing conditions and regulatory approvals. However, judging by the share price appreciation of both the companies (Cintas up 5.2%, G&K up 17.7%) post the announcement of the deal, it appears that investors are bullish on it.
CINTAS CORP Price
CINTAS CORP Price | CINTAS CORP Quote
G&K SVCS A Price
G&K SVCS A Price | G&K SVCS A Quote
According to the terms of the agreement, Cintas would acquire all the outstanding shares of G&K for $97.50 per share, which represents a premium of about 19% to its closing price on Aug 15. The transaction equates to total enterprise value of approximately $2.2 billion, including acquired net debt.
Headquartered in Minneapolis, MN, G&K operates as a branded uniform and facility services program provider in the U.S. and Canada. With over 8,000 employees serving customers from 165 facilities in North America, it reported annual revenues of $950 million last year.
Post acquisition, G&K would operate as a wholly-owned subsidiary of Cintas and is likely to retain its existing brand name. The combined company is likely to cater to over one billion business customers with an extended product portfolio and additional processing capacity. Customer service is also likely to improve with increased route density.
The synergies from the combined operations are likely to yield $130 million to $140 million in cost savings and the transaction is anticipated to be accretive to Cintas’ earnings from the second year of its operation.
Cintas had earlier offered an initial guidance for fiscal 2017 on the back of solid fourth-quarter fiscal 2016 results. The company expects fiscal 2017 revenues in the range of $5.150 billion to $5.225 billion, up 5–6.5% year over year. Earnings from continuing operations are expected to be within $4.35–$4.45 per share, which represents a year-over-year improvement of 6.4–8.8%. The guidance is likely to be revised up in the imminent future and looks quite enterprising for the investors.
Cintas currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include CRA International Inc. (CRAI - Free Report) and CBIZ, Inc. (CBZ - Free Report) , both carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>