CHICAGO, SEPT. 12 -- ServiceMaster LP, a leading provider of consumer home services, teamed up today with Waste Management Inc. in an $818 million partnership to provide lawn care, pest control and other services to consumers.
ServiceMaster Chairman C. William Pollard and Waste Management Chairman Dean Buntrock announced the agreement in principle for the new partnership, which will combine Waste Management's pest control business and its TruGreen lawn care business with ServiceMaster's consumer service businesses.
ServiceMaster businesses that will become part of the new partnership include the Terminex termite and pest control businesses; the Merry Maids maid service; the American Home Shield Corp. home service warranty business; and all ServiceMaster commercial and residential cleaning services.
The resulting business will be known as ServiceMaster Consumer Services Limited Partnership.
The agreement in principle calls for Waste Management and ServiceMaster to develop and take part in joint marketing efforts in both consumer services and management services.
Completion of the deal is subject to approval of directors of both companies and execution of a definitive exchange agreement.
ServiceMaster, based in Downer's Grove, Ill., will hold the majority interest in the new business.
The agreement initially gives ServiceMaster 80.1 percent of the common equity in the business and Waste Management 19.9 percent. Waste Management, headquartered in Oak Brook, Ill., also will receive a preferred interest convertible into another 2.1 percent of common equity.
Buntrock said Waste Management will be represented on the new company's board of directors but will not play an active role in day-to-day management.
The companies estimated the value of Waste Management's interest in the partnership at $180 million. Analysts estimated the value of the partnership at around $818 million.
"This is a good deal for both sides," said Keith K. Stratos, an analyst who follows consumer service industries. "Consumer home services stands to be one of the fastest growing business segments in the country in coming years, and this positions ServiceMaster and Waste Management, already strong, to take full advantage of the anticipated growth."