Higher Profile After Going Private : ARA Services Works on Its Image
ARA Services Inc. expects to continue its role as a leading purveyor of food, health-care and medical services, and it isn’t a bit shy anymore about making itself known.
Emerging from the recognition it got as caterer to the 1984 Olympic Games in Los Angeles, ARA has been shaking off a decades-long policy of keeping a low profile, even though it has become a privately held company. It is splashing a new logo on most company property and is launching an extensive ad campaign.
Last Dec. 19, ARA ended a quarter of a century as a public company, ostensibly in order to maintain the same management style and direction that saw 1959’s $24-million cafeteria operation become 1984’s $3.4-billion services conglomerate.
“We are going to continue what we’ve been doing, with leading growth businesses in leading growth markets,” said Joseph Neubauer, ARA’s 43-year-old chairman, president and chief executive and lead man in the decision to take ARA private.
“We like the style, we like the pace. Our long-term objective was to keep things the same,” he said in a recent interview.
Neubauer said the added $878-million debt incurred in buying up the company’s stock will not make ARA sluggish.
“We continue to build market position. Our activity hasn’t slowed down,” he said, adding that capital investment this year will be second only to the record $500 million spent in 1984.
“There’s now a greater sense of urgency, a recognition that we all really have to take care of business,” said Alan K. Campbell, vice chairman and executive vice president and one of 62 managers in the buy-out. “If anything, the change is going to make us more attentive.”
Much of ARA’s recent growth has been internal, Neubauer said.
“We’ve always been able to detect the leading edge of business, both to get in businesses you weren’t in before and get out of some businesses.”
In past years, ARA has expanded its operations into 24 lines of business and now employs 112,000 people worldwide.
Among ARA’s myriad businesses is providing food, vending machines and refreshments to schools, universities, hospitals, businesses, conventions, nursing homes, government facilities, airports and sports stadiums.
It also distributes books and magazines to retailers; provides health-care and management services for nursing homes, day-care centers, hospital emergency rooms and prisons; rents, maintains and cleans uniforms and linens for a wide variety of occupations, and maintains and cleans health-care, educational and corporate facilities.
It also provides ground services for airlines at many major airports and transports both people and cargo through its transportation services division.
Last year, the company managed food service management for the Winter Games in Sarajevo, Yugoslavia, and was a sponsor and provided food and transportation services for the Olympic Games in Los Angeles.
ARA’s acquisitions in recent years included the Solon vending machine company for $103 million in 1983 and several small businesses for $43 million in 1984.
“We know about . . . the vending business, and Solon is a leading company, a significant market force in an area we’re comfortable in,” Neubauer said.
Other areas targeted for expansion are the home health care and ground service handling businesses, he said.
ARA also plans to seek a role in the 1988 Olympic Games in Seoul, South Korea, and the Winter Games in Calgary, Canada, and more sports arenas.
The company has also pared some of its operations.
In fiscal 1984, ARA sold its school bus operations to Laidlaw Industries Inc. because the business had “terribly big capital needs” with short-lived assets and it “didn’t fit our long-term plans,” Neubauer said. He said Air LaCarte, ARA’s airline catering subsidiary, was sold to Ogden Corp. for similar reasons.
Mary Van Deventer, an analyst with the investment firm of Widmann, Blee & Co., said ARA can always divest itself of businesses if its debt grows too burdensome.
“We have no immediate plans to sell off any major parts of the company,” Campbell said. “Nor do we feel that the debt obligation is going to force us to do that.”
The management buy-out was triggered in July when William Siegel, a Los Angeles investor and former ARA executive, offered $60 per share for the company.
Neubauer said that offer was quickly rejected by the ARA board. From that point until the management buy-out at $71.75 a share began Sept. 22, “this place really felt like it was under siege. I spent a fair amount of sleepless nights tossing and turning.”
“I think they’ll fare very well,” Van Deventer said. “Joe Neubauer’s very bottom-line-oriented. A lot of the incentive programs he instituted in public companies will have even more impact as a private company.”
Among the new initiatives she cited as signs of the company’s competitiveness are a program designed to have salespeople in one division give leads to those in other divisions and a refurbishing of health-care facilities to attract private, paying customers.
As for the new image-building program, Van Deventer said the company is trying to “capitalize on the fact that ARA has a good name now and to make use of the recognition of that name. They have more confidence.”
She said the buy-out probably will hinder acquisitions somewhat but will give management the luxury of taking a longer-term view.
“Basically, a lot of the management team is fairly young. They’re positive, very eager and very knowledgeable,” she said.
By the end of 1985, ARA will be ensconced in 191,000 square feet of space and 11 floors at One Reading Center, to be renamed as the ARA Building. The Reading Co. property is in an area that has lagged far behind developers’ hopes and is still dotted with adult bookstores and fast-food emporiums.
Neubauer is unfazed. “This company has always been a risk taker. If there weren’t any risks, there wouldn’t be any ARA.”