ORLANDO, Fla. — In a deal that has significant implications for the pest control industry, especially in Florida, Harvey L. Massey, chairman and CEO of Massey Services, announced the company has reached a definitive agreement to purchase Sunair Services Corporation including its subsidiary, Middleton Lawn & Pest Control. Massey Services is a privately held company.
According to a press release from Sunair Services, the agreement is pursuant to Massey acquiring all of the outstanding common stock of Sunair in an all-cash transaction valued at $2.75 per share, which represents a premium of approximately 47 percent over the stock’s closing price on Sept. 25, 2009.
Assuming the deal receives FTC approval, Middleton’s operations will integrate with those of Massey Services, representing one of the pest control industry’s largest mergers in recent years.
“The addition of Middleton’s employees and customer base in both the pest and lawn segments will move our company to a new level in our industry,” said Harvey Massey. “They’ve been an outstanding competitor over the years and have some great people. The integration of their team members and customers into our service system will have a powerful and positive impact on our operations.”
Prior to the acquisition, Massey Services had approximately 800 team members, 700 vehicles and just under 200,000 customers, being serviced out of 61 service centers throughout Florida, Georgia and Louisiana. With consolidated operational revenues of $77.5 million in 2008, Massey Services was ranked twelve on PCT’s Top 100 list (see May 2009). Middleton was ranked 13th on the PCT Top 100 List with $57.6 million in revenues and 26 service centers, all in Florida.
Spokesperson Bud Brewer told PCT that Massey Services should benefit from the combined resources. “Over the years there has been a very healthy competition between the two of us, and that competition has made both of us better. I’ve been bullish on this acquisition for some time. I told Mr. Massey that if there is one big whale we could get, this would be the one.”
A Closer Look
Looking at the numbers, there are both similarities and differences between Massey Services and Middleton Lawn & Pest Control Here’s a sampling of the similarities:
- Both companies are headquartered in Orlando, Fla.
- Both companies rank back-to-back on PCT’s 2009 Top 100 list. Reflecting 2008 numbers, Massey was #12 ($77,495,632) and Middleton was #13 ($57,664,302).
- They have a similar residential/commercialmix: Massey performs 89 percent residential work; Middleton, 83 percent residential. Massey performs 11 percent commercial work; Middleton, 17 percent commercial.
- Both companies grew revenues roughly the same from 2007 to 2008: Massey grew 4.2 percent; Middleton grew 4.5 percent.
While there are many similarities, there also are several key differences:
- Massey has 61 offices; Middleton has 26.
- Massey has about 800 employees; Middleton has 506.
- Service breakdowns differ substantially because Middleton performs so much turf and ornamental work: Massey performs 37 percent general pest control, 34 percent termite control and 22 percent T&O. Middleton performs 21 percent general pest control, 21 percent termite control and 58 percent T&O.
Source: PCT’s 2009 Top 100 list (which reflects 2008 revenues) and Massey Services
BACKGROUND. Massey Services has been interested in acquiring Sunair Services for some time, and earlier this year, Harvey Massey made Sunair Services an offer to purchase the company for $3 per share, plus the assumption of debt. That deal became entangled in a nasty struggle among the Sunair Board of Directors. Since 2005, Sunair Services has been controlled by Coconut Palm Capital Investors II, an affiliate of Royal Palm Capital Partners. In 2008, a dissident shareholder group, led by Michael Brauser, Michael Herman and Dru Schmitt, attempted to take control of the company and replace the board by using the written consent of a majority of shareholders. The group claimed that the company was not managed in the best interests of all shareholders and that the fees paid to an affiliate of Coconut Palm was excessive as was the compensation paid to the current CEO and directors. Ultimately, Massey withdrew that offer.
After that deal failed to materialize, a group of shareholders complained about the board opting to back Chairman Richard Rochon’s “personal interests not to sell” the company and sought to replace six of the seven members.
The sale price that was agreed upon by Massey and Sunair is for $36 million, a price 8.3 percent below what a failed deal earlier this year called for, according to the Wall Street Journal. Sunair shareholders will get $2.75 each, which is below the $3 offering Massey Services made earlier this year but subsequently withdrew.
In the Sunair press release, Chairman Richard Rochon said that “Sunair’s board of directors has concluded a lengthy evaluation of numerous strategic alternatives to enhance shareholder value and has concluded that joining forces with Massey is in the best interests of our shareholders.”
WHAT’S NEXT? The transaction is expected to close in November subject to the approval of Sunair’s shareholders, customary regulatory approvals and other closing conditions. Following the closing, Harvey Massey will be the Chairman and CEO of the combined companies. Harvey Massey is a shareholder of Sunair and owns approximately 9.63 percent of Sunair’s common stock.
Massey Services and Middleton Lawn & Pest Control compete head to head in many markets, so during the next 60 to 90 days Massey Services will finalize all of the administrative and operational issues that have resulted from this merger. “We plan to begin 2010 as a deeper and strong-er company, but with the same emphasis we’ve always had on operational excellence and providing total customer satisfaction,” Massey said.
Editor’s note: This story was compiled from press releases, company-issued statements and previous reporting from PCT.