G&K Services, Inc. (GK) Surges on Buyout Offer by Cintas Corp.
Shares of Minnetonka, Minnesota, based G&K Services, Inc. (GK) rose on Tuesday, against the backdrop of a generally lower day in stocks overall. G&K's stock was up 17.74%, rising $14.57 per share, to close at $96.70, on volume of 3,120,597 shares. The company announced that it is being acquired by rival Cintas Corp. at a price of $97.50 per share.
G&K announced on Tuesday that its Board of Directors has unanimously approved a definitive agreement in which the company will be acquired by Cintas Corporation (CTAS). The deal is valued at about $2.2 billion, including G&K's outstanding indebtedness. Cintas will pay G&K shareholders $97.50 per share, which reflects a 19% premium above G&K's Monday closing share price. The transaction is expected to close in the next four to six months.
The purchase price also represents a 20% premium over G&K's all-time closing high, and a 69% premium over its 52-week closing low. The shares of both G&K and Cintas were up by 31% and 18% year-to-date, respectively.
The transaction has been approved by the boards of directors of both companies. However it is still subject to approval by the holders of G&K Services' common stock, the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and other customary closing conditions.
Cintas' stock closed up 5.19% on the news, rising $5.57 per share to close at $112.99, on volume of 2,172,046 shares.
Based in Cincinnati, Ohio, and founded in 1929, Cintas is an industry leader in providing corporate identity uniform programs, entrance and logo mats, restroom supplies, promotional products, first aid, safety, fire protection products and services, and industrial carpet and tile cleaning. They operate more than 400 facilities in North America, including six manufacturing plants and eight distribution centers. The company stock trades on the NASDAQ.
“This is a compelling transaction that delivers substantial and immediate cash value to our shareholders and expands options for our customers going forward,” said G&K Chairman and Chief Executive Officer Douglas A. Milroy. “We believe the combination has strong strategic logic and creates the right partnership to meet the evolving needs of our customers. In addition, a larger, more diversified company offers employee opportunities as well...This transaction comes as we announce another set of strong results, with our team delivering record earnings per share and record cash flow in fiscal 2016.”
“Cintas’ management team and Board of Directors have a deep level of respect for G&K Services, its long and impressive heritage, and its employees," noted Cintas’ Chief Executive Officer, Scott D. Farmer. "Our companies share a dedication to customers, employees-partners and shareholders, which will build a great foundation for a successful combination.”
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