ServiceMaster agrees to takeover

Lawn care and pest control provider ServiceMaster Co. agreed Monday to be bought by an investment group in a cash deal valued at $4.5 billion as the company tries to recover from years of declining results.

Bowing to shareholder pressure, the owner of TruGreen Lawn Care, Terminix pest control and Merry Maids cleaning service announced a deal with an investment group led by private equity firm Clayton, Dubilier & Rice Inc.

The announcement came nearly five months after the company said it was exploring strategic alternatives amid pressure from shareholders Ariel Capital Management and Newcastle Capital Management to consider a sale or buyout.

Under terms of the agreement, ServiceMaster stockholders will receive $15.625 in cash for each outstanding share, which is 16% higher than ServiceMaster’s closing price of $13.47 on Friday.

Clayton also will assume about $1.02 billion in debt.

ServiceMaster’s board has approved the acquisition. Its stockholders will vote on the transaction at a special meeting expected to be held in the second or third quarter.

The company, tinged with Christian tradition, lists as its top corporate objective to “honor God in all that we do.”

Since 2004, ServiceMaster’s net income has fallen nearly 49% to $169.7 million in 2006, even as its revenue climbed nearly 12%. During the quarter ended Dec. 31, the company earned $38.9 million, a 44% increase from the same period in 2005.

The company is closing its Downers Grove, Ill., headquarters and relocating its operations to Memphis, Tenn., where many of its subsidiaries are based. The deal is expected to be completed by November.

In 2006, ServiceMaster had 32,000 employees and a network of 5,500 company-owned and franchise locations.

Shares of ServiceMaster rose $1.68 on Monday to $15.15.