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Cintas Completes G&K Buyout to Boost Services Capabilities

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Business services provider, Cintas Corporation (CTAS - Free Report) recently completed the acquisition of G&K Services, Inc. for approximately $2.2 billion, including acquired net debt, after receiving all the requisite regulatory approvals. The transaction is expected to strengthen the leading market position of Cintas across the globe.

Headquartered in Minneapolis, MN, G&K Services operates as a branded uniform and facility services program provider in the U.S. and Canada. With over 8,000 employees serving over 170,000 customers from 160 facilities in North America, it reported annual revenues of $978 million in fiscal 2016.

G&K Services would operate as a wholly-owned subsidiary of Cintas and is likely to retain its existing brand name. The successful integration of G&K Services is likely to expand Cintas’ customer profile and augment its revenues. 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 expected to yield $130 million to $140 million in cost savings. The transaction is anticipated to be accretive to Cintas’ earnings from the second year of its operation.

With G&K Services on board, Cintas is likely to gain a sizable footprint in the industry. Incidentally, the stock has also outperformed the Zacks categorized Linen Supply & Related industry in the past three months with an average return of 6.4% compared with 3.9% gain for the latter.



The acquisition will further boost overall revenues. Cintas aims to continually achieve revenue build-up by increasing penetration levels at existing customers and broadening the customer base to include fresh business segments. The company also identifies additional product and service opportunities for its current and future customers to expand its portfolio. This focused approach for a steady top-line growth is commendable.

We remain encouraged by the inherent growth potential of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the industry include CBIZ, Inc. (CBZ - Free Report) , CRA International, Inc. (CRAI - Free Report) and The Hackett Group, Inc. (HCKT - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CBIZ has beaten earnings estimates twice in the trailing four quarters for a positive surprise of 21.45%.

CRA International has a long-term earnings growth expectation of 8%.

The Hackett Group has a long-term earnings growth expectation of 17.3%.

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