Adds CEO comments in paragraph 8, response from Engine in paragraph 12, updates shares in paragraph 3
By Savyata Mishra
March 11 (Reuters) - Cintas CTAS.O said on Wednesday it had agreed to buy smaller rival UniFirst UNF.N in a cash-and-stock deal valued at $5.5 billion, combining two of North America's largest workwear and facility services providers.
Cintas has offered a total of $310 per UniFirst share, representing a premium of about 20% to the stock's last close.
Shares of UniFirst jumped 7% in early trading while Cintas was down 1.2%.
The deal caps a multi-year pursuit in which Cintas made at least three formal approaches since 2022.
UniFirst rejected a $5.3 billion bid last year, and, in December, Cintas added a $350 million reverse termination fee to its $275-per-share offer to bring the company to the negotiating table.
Cintas is banking on the deal to expand its reach and cut costs by combining delivery routes, plants and supply chains, as it looks to better compete with rivals including $Aramark(ARMK-W)$ ARMK.N, which has been expanding its garment and facility service offerings.
"Cintas and UniFirst customers will be able to add new products and services from the combined business, which will make our offering more competitive in a dynamic, evolving industry," Cintas CEO Todd Schneider said on a call with analysts.
The combined business will serve about 1.5 million customers across the U.S. and Canada and offer a wider range of uniform, cleaning and first-aid services.
Cintas expects savings of about $375 million over four years by reducing overlapping costs in materials, production and service operations.
Members of the Croatti family, UniFirst's founders, who control about two-thirds of the voting power, have agreed to vote in favor of the acquisition and will retain an ownership stake in the combined company.
Engine Capital, which owns roughly 3.2% of UniFirst, had mounted a proxy fight last year urging the company to pursue a sale. The activist investor was unable to win board seats because of the dual-class voting structure.
On Wednesday, it called the Cintas deal "the right transaction, at the right price, with the right partner."
The deal is expected to close in the second half, subject to regulatory and UniFirst shareholder approvals.
(Reporting by Savyata Mishra in Bengaluru; Editing by Shreya Biswas and Sriraj Kalluvila)
((Savyata.Mishra@thomsonreuters.com;))
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