PE consortium buys Aramark for $8.3bn

Aramark chairman Joseph Neubauer has partnered with GS Capital, CCMP, JPMorgan, THLee and Warburg Pincus to buy the cafeteria operator, upping a May 1 bid.

A private equity group including GS Capital Partners, CCMP Capital Advisors, JPMorgan Partners, Thomas H. Lee Partners and Warburg Pincus have partnered with Aramark chairman Joseph Neubauer to take the Philadelphia-based cafeteria operator private for $8.3 billion (€6.5 billion). The deal includes $6.3 billion in cash and $2 billion of assumed debt. Aramark is currently listed on the New York Stock Exchange.

The latest offer of $33.80 a share is up 5.6 percent from the group’s May 1 bid of $32 a share. Since that offer was made, the buyout group has been under pressure to sweeten the pot to counter charges that Neubauer, who has 40 percent of Aramark’s Class A shares and 17 percent of its Class B shares according to SEC documents, was underpaying.

Neubauer has taken the company private before. In 1984, a year after he was named chief executive officer, Neubauer led a management group that bought Aramark, then known as ARA Services, for $889 million, in order to fend off a hostile takeover bid. The company later went public in December 2001 for $23 a share.

Today Aramark has nearly 240,000 employees and operates in 19 countries. In the fiscal year ended in September 2005, Aramark reported revenues of $11 billion. The company runs cafeterias in schools, museums, tourist sites and prisons. Aramark also sells hot dogs and beer at 50 professional sports stadiums and markets cafeteria and health care uniforms.

The company is expected to release third-quarter earnings tomorrow, which are expected to be weaker than expected because of poor results in its uniform marketing unit, results which the company reported in a preliminary earnings statement last month.

Debt financing for the deal will be provided by JP Morgan Chase and Goldman Sachs. The two firms also acted as financial advisors to the private equity investors. The transaction is expected to be completed by late 2006 or early 2007, pending stockholder approval.

PE investment in food services is not unprecedented. The Blackstone Group currently owns Centerplate, a provider of food and beverage concession to sports stadiums, which it acquired in 1995 for $122 million. In 2003 the company exited Volume Services America Holdings, a concessionaire under the Centerplate trade name and operates at 125 ballparks and concert arenas, in a $277 million IPO on the American Stock Exchange.