Aramark to Spin Off Uniform Service by End of 2023

- Advertisement -

Aramark announced the spinoff on the same day it announced second quarter earning results

- Advertisement -


- Advertisement -

Aramark said Tuesday that it plans to separate its uniform services business into an independent, publicly traded company.

The spinoff of Aramark Uniform Services (AUS) is expected to occur by the end of 2023, a statement said, It will be tax-free for Aramark (ticker: ARMK) and its stockholders.

- Advertisement -

“We think both companies can operate more effectively as separate organizations,” said John Zillmer, Aramark’s CEO.

Zillmer said the two companies—Aramark and AUS—have different cultures. Aramark provides food and facilities services to companies in sectors such as education, sports, leisure and corrections, healthcare, and business. This compares to AUS, which is a service and delivery company. AUS provides work uniforms, including Dickies pants and shirts, for use in manufacturing, industrial, automotive, food service, and healthcare industries. It also supplies floor mats, towels, linens, as well as managed restroom and first aid services.

“There’s little synergistic value to keeping the businesses together. Separation just makes sense,” Zillmer told Barron’s.

A separation will allow the management and boards of each company to focus solely on their respective businesses. It will also let the investment community value each business independently, the statement said.

“The move will create two industry leading, independent public companies with strong growth and profitability strategies,” said Ian Zaffino, a managing director, senior research analyst at Oppenheimer & Co, in a research note. Zaffino has a $45 price target for Aramark.

Shares of Aramark added more than 1% to close at $34.62 Tuesday.

Aramark announced the spinoff on the same day it reported second quarter earnings results, The company produced $35.7 million in net income attributable to Aramark shareholders, or 14 cents a share, for the three months ended April 1, according to a separate statement. This compares to $77.6 million in losses, or 30 cents a share, for the same period in 2021.

Second quarter adjusted net income was $56.3 million, or 22 cents. Analysts surveyed by FactSet had expected adjusted profit of 21 cents a share. Revenue rose 37% to $3.86 billion for the quarter. This beat the $3.78 billion in revenue analysts surveyed by FactSet had anticipated.

Aramark produced pre-Covid annual revenue of $13.6 billion in 2019. AUS is much smaller and generated $2.6 billion in annual revenue in 2019. Once the spinoff is completed, Zillmer will continue to serve as CEO of Aramark while Tom Ondrof will remain chief financial officer . Kim Scott will serve as CEO of AUS while Rick Dillon will be CFO.

The AUS transaction isn’t an initial public offering but a spinoff, Zillmer said. “Aramark shareholders will receive some proportionate share at the spin. But it’s intended to be tax-free to Aramark and shareholders. We’re still working through with advisors what the final structure will look like,” he said.

Aramark will also not raise any money with the spinoff. “As currently contemplated it’s a spin to shareholders with no capital raise,” Zillmer said.

AUS intends to raise debt through a one-time cash dividend that will go to its parent, Aramark. Aramark is expected to use the proceeds to pay down debt. Aramark may also retire a portion of its existing debt by exchanging AUS debt securities for outstanding Aramark debt securities. “We could do a debt-for-debt exchange or do a dividend to pay down debt or a combination of both. We want to maintain technical flexibility around the capital structure,” Zillmer said.

Goldman, Sachs & Co and JP Morgan Securities are acting as financial advisors on the transaction. Wachtell, Lipton, Rosen and Katz is serving as legal counsel.

Write to Luisa Beltran at [email protected]


Credit: /

- Advertisement -

Stay on top - Get the daily news in your inbox

DMCA / Correction Notice

Recent Articles

Related Stories

Stay on top - Get the daily news in your inbox