Next phase in Company’s acceleration of value-creating strategies

Highlights:

Optimizes strategic focus and flexibility for both companies
Transaction structured as spin-off that is tax-free to Aramark and its stockholders
Remain committed to financial targets communicated at Analyst Day
Conference call to be held today at 8:30 am ET as part of Second Quarter earnings results
Supplemental presentation material available on Aramark’s Investor Relations website
May 10, 2022 06:31 AM Eastern Daylight Time
PHILADELPHIA–(BUSINESS WIRE)–Aramark (NYSE: ARMK) today announced its plan to separate Aramark Uniform Services (AUS) into an independent, publicly traded company. The transaction is intended to be structured as a spin-off that is tax-free to Aramark and its stockholders. The Company currently expects the spin-off to occur by the end of fiscal 2023.

“Substantial improvements across the Company—including culture, organization, strategy, client, and customer service—and a program of selective, targeted investments, have enabled us to materially improve our growth trajectory,” said John Zillmer, Aramark’s Chief Executive Officer. “Kim Scott, who joined in October 2021 as President and Chief Executive Officer of AUS, and her team have developed a compelling strategic framework and vision for AUS. We believe that Aramark and AUS can best execute their respective value-creating strategies operating as two independent, publicly traded companies.”

Strategic Rationale

The Board of Directors and Aramark management team regularly assess the business portfolio to further enhance performance with an ongoing commitment to drive stockholder value, as communicated during Aramark’s Analyst Day in December 2021.

Given the enhancements to each of the two businesses over the past two years, the Company believes that both are now well-positioned to succeed independently, and the separation will enable superior outcomes for each business.

Aramark anticipates the benefits of separation will include:

Enabling the executive leadership and boards of each stand-alone company to focus solely on its respective business
Each business’ narrowed focus, and the ability to compensate employees with equity incentives linked solely to its own performance, enhances the ability to attract and retain strong employees
Availability of equity linked solely to its distinct business will facilitate each company’s acquisition strategies
Flexibility for optimizing capital structures and capital deployment priorities
Ability for the investment community to value each business independently, which the Company expects will result in optimized total stockholder returns
Aramark

Under the intended structure, Aramark will continue to operate as a proven global leader in food and facilities services, with world-class scale and capabilities focused on serving clients across 19 countries in five principal sectors: Education, Sports, Leisure & Corrections, Healthcare, Business & Industry and Facilities & Other. Through its two food and facilities reportable segments—United States and International—Aramark reported pre-COVID annual revenues of $13.6 billion. Since that time, the Company has implemented transformative actions in leadership, culture, and growth orientation that have already begun to result in increased revenue growth and operating efficiencies. Aramark operates in an attractive and growing addressable market, which is estimated to be approximately $500 billion in revenue across its target geographies and core business portfolio, with favorable outsourcing trends.

In fiscal 2021, Aramark food and facilities achieved record net new business performance—nearly five times higher than the historical five-year average—reflecting new business wins over $1 billion and retention rates of approximately 96%. Aramark expects to build on this momentum in fiscal 2022 and beyond.

After the completion of the proposed spin-off, John Zillmer will continue to serve as Chief Executive Officer of Aramark following his return in October 2019, and Tom Ondrof will remain as Chief Financial Officer of Aramark after joining in January 2020.

Aramark Uniform Services

Aramark Uniform Services provides its customers with full-service rental programs, resulting in a compelling contracted and recurring revenue model. The customer base is serviced by a leading geographic footprint in the United States and Canada with programs focused on uniforms, floor mats, towels, linens, managed restroom and first aid services. The estimated $40 billion revenue market presents substantial opportunity for growth. Pre-COVID annual revenues for Aramark Uniform Services totaled $2.6 billion with its fiscal second quarter 2022 performance surpassing the pre-COVID second quarter fiscal 2019 period.

Recent investments focus on enhancing customer experience and accelerating profitable growth. Customer retention rates improved by more than 150 basis points in fiscal 2021 compared to the historical five-year average. These investments also resulted in a stronger salesforce that delivered nearly $250 million in new client wins in fiscal 2021, as well as an operating platform that is anticipated to enable efficiencies across all customer touchpoints including supply chain, logistics, inventory management, and back-office support.

Kim Scott will lead the independent public company as Chief Executive Officer. Newly appointed Rick Dillon will serve as Chief Financial Officer. The leadership assembled has extensive industry experience, in addition to transaction-related and spin-off expertise. The Company is recruiting a strong and committed Board of Directors able to effectively support AUS management and advance the interests of all stakeholders.

“I am honored to lead the Aramark Uniform Services team forward, and we are all excited to fully develop the great opportunities before us.” said Scott. “Since October, our team has developed a plan to deliver a step change increase in organic revenue growth and margin. By capitalizing on our recent investments, and modernizing our approach to customer relationship management, we expect to substantially increase the performance of our business. I am especially energized by our amazing frontline team who are committed, tenured, and passionate about delivering an outstanding experience for our customers. We are grateful to all of our teammates for all they have done and will continue to do to ensure we reach our full potential as a company.”

*Pre-COVID level reflects performance compared to the same period in fiscal ’19

Capital Structure

Aramark remains committed to its capital allocation strategy and deleveraging targets as highlighted at the Company’s Analyst Day. It is also expected that the aggregate regular stockholder dividend will remain consistent with historical payments following the completion of the spin-off.

Aramark Uniform Services intends to raise debt that would result in a one-time dividend of cash to Aramark that is expected to be used to pay down outstanding Aramark debt. Aramark may also retire a portion of its existing debt by means of an exchange of Aramark Uniform Services debt securities for outstanding Aramark debt securities. Both companies remain committed to maintaining strong balance sheets with target leverage ratios below 3.5x, while maximizing financial flexibility with capital structures optimized to reflect their distinct growth opportunities and cash flow profiles.

Transaction Details

The spin-off is generally expected to qualify as tax-free to Aramark and its stockholders for U.S. federal income tax purposes. The transaction is subject to certain customary conditions, including final approval of the Aramark Board of Directors, receipt of a favorable opinion and Internal Revenue Service ruling with respect to the tax-free nature of the transaction, and the receipt of other regulatory approvals. There can be no assurance regarding the ultimate timing of the proposed transaction or that the transaction will be completed.

Goldman, Sachs & Co. LLC and J.P. Morgan Securities LLC are acting as financial advisors. Wachtell, Lipton, Rosen and Katz is serving as legal counsel.

Conference Call

Aramark will host a conference call to review its second quarter fiscal 2022 results today at 8:30 am ET. In addition, the Company will discuss its plan to separate into two independent publicly traded companies.

The broadcast of the conference call and related financial information will be available through the Investor Relations section of the Aramark website at www.aramark.com (click on the webcast icon and follow the instructions). A replay of the call and related earnings materials will be available through the Archives section of the same website.