Aramark shares spike on takeover report
In March, two Wall Street analysts had called for an activist investor to step up and push out Aramark’s current leadership, which has failed to generate enough revenue growth to satisfy some investors.
Shares in Aramark Corp. spiked as much as 10 percent at mid-day Thursday after news agency Reuters reported that private equity firm Mantle Ridge L.P. was exploring a buyout offer for the Philadelphia food-service giant.
The shares eventually worked their way back down to $34.89, up 6.6 percent from Wednesday’s close of $32.74.
Aramark said it does not comment on speculation or rumors. Mantle Ridge’s latest Securities and Exchange Commission filing on its equity holdings, from May 16, does not show any Aramark shares. The investment firm did not respond to a request for more information.
The Reuters report follows a call in March by two Wall Street analysts for an activist investor to step up and push out Aramark’s current leadership, which has focused on improving profit margins but has failed to generate enough revenue growth to satisfy some investors.
Mantle Ridge’s founder, Paul Hilal, is a former senior partner at Pershing Square Capital Management, where he participated in activist investments in Ceridian, a data processing company, and Air Products & Chemicals Inc., according to a biography on his firm’s website.
Reuters said a buyout of Aramark, which has a market capitalization of more than $8 billion and $7 billion in debt, would be one of the largest since the financial crisis.
Early this year, Aramark was embroiled in controversy over a decision by the company not to pay bonuses to thousands of frontline managers.
A knock against Aramark, according to Dan Dolev and Sean Kennedy, analysts at Nomura Instinet who called for an activist to push for changes at Aramark, is that the company does not win enough new business compared with its top rival, Compass Group.
This week, Aramark announced that it had won a new dining services contract, effective Saturday, at Salem State University, which is near Boston and has 6,800 undergraduates. Aramark’s competitors for that business were Aladdin and Sodexo, a Salem State spokeswoman said.