These are the largest deals on record for Aramark's 80-year history. Aramark recently made its third debut as a publicly-traded company in 2013, and is counted among only four other U.S. companies in history to do so. The Philadelphia-based company is spending $1.3 billion to acquire Avendra, which was founded in 2001 by merging the procurement divisions of its founding shareholders, which included companies such as, Hyatt, Fairmont Hotels, ClubCorp and IHG, with the goal of streamlining procurement processes through technology. After adjustments for tax benefits, the agreement will represent a net purchase price of $1.05 billion, and a representative of Aramark said in a statement that the company expects to generate roughly $40 million annually in savings on procurement costs.
"We are very enthusiastic about this evolution for Avendra. We think the combination of Avendra and Aramark, a company admired and respected around the world, will bring additional value to both our customers and supplier partners," Wolfram Schaefer, president and CEO of Avendra, said in a statement. "Our process for creating valuable contracts and providing hospitality expertise will only get stronger and our commitment to world-class customer service will continue to be the foundation for all we do.”
It’s possible that the real winner in Aramark’s Avendra buy could be Marriott International, which owns a 55-percent stake in the company. As a result, the hotel company is expected to receive roughly $650 million as part of the deal. On top of this, Aramark's stock is trading higher this morning due to the announcement of the sale, putting Marriott in a further position to benefit.
As part of the agreement, Marriott, Hyatt, Accor and ClubCorp have agreed to commit to a five-year procurement agreement with Aramark and Avendra
The other half of Aramark’s deal is the $1 billion purchase of Minnesota-based AmeriPride. The net purchase price of this company is expected to total around $850 million after tax adjustments, and Aramark expects the acquisition will generate approximately $70 million in annual benefits to its operating costs.
“These strategic and financially compelling transactions represent the next step in our commitment to drive sustainable shareholder value,” Eric J. Foss, president and CEO of Aramark, in a statement.
Both deals are expected to close by the end of the year, though they may be subject to regulatory approvals. A representative of Aramark said in a statement that the company will finance the deals by issuing new debt, and has already secured fully committed financing for both transactions.