Orkin Announces Acquisition of PRISM

In its most significant acquisition to date, Orkin Pest Control has reached an agreement in principle to purchase PRISM, S.C. Johnson’s highly regarded commercial pest control operation. Under the terms of the agreement, PRISM will retain its business of providing warehousing, filter exchange, and hood and duct cleaning services to restaurants and hotels, while Orkin will provide pest control services in these accounts. In a related move, the companies announced a joint venture to provide pest elimination services to customers in the retail market (i.e. supermarkets, mass merchandise stores, etc.), where S.C. Johnson has a growing market presence.

The operations to be acquired under these agreements recorded revenues of approximately $25 million in their most recent fiscal year. Purchase price of the transaction was not announced and appropriate regulatory approvals have been obtained.

"We are very pleased with this strategic acquisition that falls in a market segment that is a top priority for our expansion plans," Gary W. Rollins, president and chief operating officer of Orkin Pest Control, said. "We are particularly excited by the opportunity to significantly broaden our commercial operations through the joint venture relationship with S.C. Johnson Professional. These two major business initiatives confirm our strategy to accelerate the growth of our commercial pest control business."

"With our expertise in the pest control business and S.C. Johnson’s relationships in the retail market, we feel we can provide a superior service package, so it became a real natural," added Harry J. Cynkus, chief financial officer of Orkin. "It was really a matter of combining the strengths of Orkin and S.C. Johnson and creating a win-win situation for both companies."

LONG-TERM COMMITMENT. The acquisition and joint venture agreements with S.C. Johnson are consistent with Orkin’s long-term strategy to grow its commercial business. During the past four years, Orkin has invested a significant amount of time and resources in strengthening its commercial pest control business, hiring a fully dedicated marketing staff to build the company’s commercial brand, known as Acurid.

Clyde Cobb, a senior-level Orkin manager with broad-based pest control experience, and Glen Rollins, a vice-president with the company, were brought in to establish the division four years ago and given the latitude to modify pay plans, restructure the sales force and change whatever else was necessary to be suc-cessful. "We really broke some paradigms," Rollins says.

The results have been impressive. Orkin now boasts 42 offices fully dedicated to the commercial market, with virtually all of them reporting double-digit revenue growth.

"We’ve spent a lot of time and money building our commercial brand (Acurid) with our customers, so we’ll likely use the PRISM name for a short time and then roll it into the Acurid operation," Cynkus said. "As a result of the purchase, we’ll now have a commercial presence in almost all of the top 50 markets in the United States."

Cynkus said PRISM service personnel will be offered employment at Orkin, while S.C. Johnson’s retail sales force will sell the joint venture’s pest control service as part of its "Total Customer Care" package, thereby strengthening both firms. "To make a joint venture work, it has to be a positive situation for both companies," he said.

MARKET REACTION. Industry observers weren’t particularly surprised by Orkin’s acquisition of PRISM. Ever since S.C. Johnson purchased the $30 million "Bugs" Burger Bug Killers operation in 1989 and changed the name to PRISM (Professional Integrated Sanitation Management), the business has performed modestly.

"I heard S.C. Johnson had struggled to raise the profitability of PRISM," said Tom Forshaw, president of Forshaw Distribution, Charlotte, N.C. However, as a result of the sale, the operation will become instantly more profitable as it is rolled into Orkin’s existing operations. "It’s an efficiency strategy," Forshaw says. "It’s also another example of the ongoing consolidation that’s occurring in the pest control industry. You’re seeing it at all levels — manufacturers, distributors and pest control companies. And there’s no end in sight."