Terminix Buys Sears

The other shoe finally has dropped. The parent company of the nation’s largest pest management firm, Terminix International, on Aug. 20 announced that it had purchased the nation’s third largest pest control firm, Sears Termite & Pest Control (STPC). Many in the pest control industry said they knew Sears was going to be sold but didn’t know when.

“I think everyone knew about a year ago that Sears was going to sell. It was not a surprise,” said Harvey Massey, president of Massey Services, Orlando, Fla. “The fact that Sears chose a Terminix or Orkin or Centex did not shock me.”

Although the deal had been in the works since March 2001, rumors surfaced throughout the industry as early as Jan. 8, 2001, when the St. Petersburg Times reported that Sears would “get out of the pest control business.”

But it wasn’t just pest control that Sears was exiting. In the first six months of 2001, the retailer lost $21 million. The company’s CEO, Alan Lacy, ordered that the company sell off its non-core units and close 89 underperforming stores. The company decided to focus on its core retail businesses and brands, like Kenmore, Craftsman and Die-Hard.

In doing so, Sears made the decision to leave the pest control industry and sell STPC to Terminix. The sale adds more than a quarter of a million residential customers to Terminix’s already large customer base.

Terminix serves more than 3 million U.S. customers through more than 325 branch offices and more than 150 franchise locations in the United States. Terminix will absorb 95 STPC locations with the purchase.

The sale was announced Aug. 20., but took effect Oct. 1. The purchase price of the sale was not disclosed. In 2000, Terminix and Terminix Europe had revenues of $1.1 billion. Sears Termite & Pest Control had sales of $100 million last year, according to company officials.

Terminix plans to integrate all Sears operations into its local Terminix offices. “We have no plan to keep physical locations,” said Norm Goldenberg, vice president of government/public affairs, licensee relations and technical services. “Sears business will fall into the Terminix local office where we both operate.”

But, STPC will continue to do some termite work for a limited period. “There will be some continuing termite remediation work that will be done by Sears. They will be performing some bait installation and monitoring for a short period of time,” Goldenberg said. “Sears is interested in turning over all business to us as quickly as possible.”

Goldenberg noted that Sears will continue to keep some offices open until their installation and monitoring obligations end in 2002.
At press time, Terminix was working with Sears to incorporate its customers into the Terminix system. Steve Good, vice president of sales and marketing for Terminix, said he was optimistic that the addition of thousands of names to Terminix’s database would be transparent. “It’s going to be fairly easy,” he said. “Sears has been great about working with us on that.”

Although Terminix didn’t work directly with any of STPC customers until Oct. 1, Good said there haven’t been any major problems so far. “Thus far, the transition phase has been exceptionally smooth.”

THE EMPLOYEES. One question that was on the minds of many was what would happen to STPC employees once the transition was complete.

“A number of Sears’ 1,500 employees, about 480 to 500, will be employed during transition of remediation. It’s no secret that finding good employees in this industry is difficult. We are actively interviewing employees. Initially, we expect to hire fewer than 100 but as the transition continues, then the opportunity to hire more will certainly exist,” Good said.

“It was disappointing that not all of the current employees were offered positions with Terminix, but that just means the rest of the industry now has a great recruitment source of highly motivated and trained sales consultants, service specialists in both pest and termite, and talented managers,” said Ian Robinson, vice president, technical operations, Sears Termite & Pest Control.

Massey, whose company employs more than 500 people in Florida and Georgia, agreed with Robinson that people in the area are already “hitting the pavement” and looking for work. “We have already had Sears people calling looking for jobs,” he said.

Massey added that he was surprised at how the news was broken to the public. “If you read the local paper (in Orlando), the real news wasn’t about the sale, it was that 1,000 people (out of 1,600) would be laid off. Typically you wouldn’t want to release this kind of information unless you want people to leave,” he said.

THE CUSTOMERS. So what happens to potential STPC’s customers, who, unaware of the purchase, open the Yellow Pages and call their local Sears office in need of pest control services? “From Aug. 20 to Oct. 1, prospects who call Sears are being told that Terminix has acquired certain assets from STPC and they’ll be hearing from a Terminix salesperson,” Goldenberg said.

The former Sears Termite & Pest Control offices, which fielded all of their nationwide calls through only two call centers, now falls within two of Ter-minix’s divisions. Terminix’s Central Division will handle all calls from Florida and Southeast U.S. Sears offices, while Terminix’s Western Division will field calls from Sears offices in Texas and Arizona.

Those STPC calls will be answered “Sears/Terminix” for the next three plus years. Terminix will have remote call forwarding in place and when those lines ring in the Terminix office, trained Terminix employees will answer and explain to the customer that Sears has been acquired by Terminix.

An even bigger question may be what happens to Sears’ once-a-year service program that the company pioneered. Sears’ Duraguard® Pest Control provided customers a once-a-year treatment and perimeter protection around a customer’s home.
Robinson said he hopes the idea of once-a-year pest control is picked up by another company in the industry. “Our experience has been that once-a-year pest control works — both from a technological/efficacious perspective and from a consumer acceptance standpoint,” he said.

Goldenberg said that Terminix will offer customers a once-a-year service. “There’s no problem if a Sears customer wants to continue an annual service,” he said. “We can offer a quarterly service, annual service or any other options that are available. We’re very flexible.”

INDUSTRY IMPACT. Those interviewed for this story said they thought the purchase would have little effect on the market in Florida or across the country, other than to further establish Terminix as the largest player in the marketplace. “We don’t think there will be any impact in Florida in any other area,” Goldenberg said.

“There won’t be any negative impact on the industry. Frankly, it’s just one less company that we have to deal with. The last time we counted there were 346 pest management companies listed in the Yellow Pages in Orlando. So if someone came in and bought two-thirds of them that would be okay by me,” Massey said.

“I think you’re going to see Florida’s two premier providers of pest control — Middleton and Massey — look to expand their presence. Outside of that, the memory of Sears will last longer in our own minds than in the minds of the average consumer,” Robinson said.
Many wondered, after the Sears buy, if Terminix would continue scouring the country for potential acquisitions.

“We have been heavily involved in several hundred acquisitions in the past five years. While we are not going out to look for all kinds of sized companies, we always have our eyes open for strategic acquisitions,” Goldenberg said. “Sears has a tremendous name and it is a good strategic fit for us.”

“It’s a win-win for customers because not only are they leaving a fine organization, but they are going to one that leads the industry,” Good said. “We’re obviously proud that Sears strongly considered us from the get-go.”

The author is editor of PCT magazine. She can be reached at jdorsch@pctonline.com

SEARS TERMITE & PEST CONTROL
Parent Company: Sears, Roebuck & Company
Headquarters: Orlando, Fla.
Founded: 1982
Company Highlights: 1982: Chuck Steinmetz founds All America Termite & Pest Control; 1997: Sears Roebuck & Co. buys All America Termite & Pest Control, retaining Steinmetz as president; 1998: Bob Case is named president of Sears Termite & Pest Control; Oct. 1, 2001, Terminix purchases Sears.
2000 Revenue: $100,000,000
Number of Customers: 250,000
Employees: 1,000 in general pest control; 500 in termite control
Number of Branch Offices: 100

TERMINIX
Parent Company: ServiceMaster
Headquarters: Memphis, Tenn.
Founded: 1927
Company Highlights: 1986: ServiceMaster buys Terminix from Cook Industries as one of its first steps in building a network of consumer services companies; Fall 1990: ServiceMaster acquires Waste Management’s pest control operations; Jan. 2, 2001: ServiceMaster acquires Allied Bruce Terminix Companies, Inc., its largest franchisee; Oct. 1, 2001, Terminix purchases Sears.
2000 Revenue: $1.1  billion (Terminix and Terminix Europe)
Number of Customers: 3 million U.S. customers; 4 million worldwide
Employees: 10,000
Number of Offices: 325 U.S. branch locations; more than 150 U.S. franchise locations; more than 400 international locations