Garry Hawkes was in ebullient mood this week after putting his signature to the sale of Gardner Merchant to French group Sodexho, creating a business with an annual turnover of £2.5b.
To establish the “alliance”, as the deal is being branded, Sodexho will purchase 100% of the British group’s share capital for £543m in cash, and will assume £173m of its debts. Gardner Merchant will also pay shareholders dividends of £13m.
To fund the deal, Sodexho is issuing new shares worth Ffr1.1b (£132m), taking on double that figure in borrowings and paying for the balance from existing cash resources.
Although Mr Hawkes admitted he would have preferred a stock market flotation, thereby preserving the company’s hard-fought independence, he said the Sodexho deal was an ideal alternative.
“Any UK organisation would, perforce, have had to rationalise the business and got rid of Gardner Merchant as we know it,” he said, clearly alluding to last year’s £700m offer from Granada.
The added attraction of Sodexho’s approach, he explained, was that five years previously the two companies had discussed setting up “some sort of joint venture”, so complementary were their businesses. Two years later, Sodexho bid £400m for Gardner Merchant when it was still part of Forte.
Ironically, it was Forte – from which Mr Hawkes subsequently led a £402m management buyout – that appears to have led the call for a trade sale after the market for flotations turned sour last year.
Neither party, however, was in the mood for recriminations this week. Mr Hawkes and 1,000 senior Gardner Merchant executives will share out more than £50m, while Forte’s remaining 24% stake will bring in about £140m, compared with a book value of £80m.
Though clearly delighted to have secured “a payout for our work”, the most important facet of the deal for Mr Hawkes was the preservation of the Gardner Merchant name and the job security of his 55,000 employees. The top 6,500 staff will be given new share options in Sodexho.
Mr Hawkes himself will be chairman and chief executive of Gardner Merchant, as well as becoming joint director general of Sodexho, with responsibility for areas including the UK, Ireland, USA, the Netherlands, Malaysia, Australasia and Hong Kong.
In the UK, where the French group has just 20 units and a turnover of about £15m, the plan being mooted is to use the Sodexho name for Gardner Merchant’s UK healthcare division, with the latter injecting its own contracts in that sector – worth a further £5m-£10m.
In countries where Sodexho has a much bigger presence, such as France and Spain, Gardner Merchant’s operations will become part of the French group. In Belgium, however, the deal creates a monopolies problem, and one of the options being considered is a sale through a management buyout.
In the USA, where combined turnover is just under $1b and the two are almost the same size, Mr Hawkes will chair a committee to decide whether they should be integrated or retain separate identities. “We clearly see the USA as being the biggest opportunity for expansion,” he said.