Is Rollins for Sale?

I wasn’t going to comment on the latest Rollins rumors, but given that I’ve received scores of calls from clients, institutional investors, hedge funds, industry magazines and the financial press, I guess it’s time for me to say something.

Last week, Bloomberg published a brief article, the relevant snippet is below:

(Bloomberg) — Rollins Inc., a pest-control services provider, is exploring strategic options including a potential sale, according to people familiar with the matter. The Atlanta-based company is working with financial advisers, said the people, who asked to not be identified because the matter isn’t public. The company has not yet launched a formal auction and Rollins could opt to remain independent, they said.

A representative for Rollins didn’t immediately respond to calls seeking comment.

In my experience, Bloomberg is not typically wrong. I think that ROL likely engaged Goldman Sachs. However, we should all keep in mind that most publicly-traded businesses engage investment banks, and most investment banking engagements are not M&A related.

Given that the Rollins family — through individual holdings and the holdings of the family trust owns more than half of the Company — the most likely reason for Rollins to engage financial advisors is for family estate planning purposes.

Gary Rollins (CEO) is in his 70s, and Randall Rollins (Chairman) is pushing 90. Further, the family just settled the lawsuit related to the family trust last fall, where over $2 billion in Rollins equity was in question. If there were ever a time to seek outside advice and move shares around, it would be now.

Of all of the different “options” that Rollins might be thinking through right now, there is one, and only one option that would absolutely require the company to engage a financial advisor and that is a block sale.

If, say, the family trust wanted to sell $2 billion in Rollins stock, it couldn’t just open up an Ameritrade account and sell that stock. The sale of that stock would be an off-market transaction (known as a block sale) whereby an investment bank sells a block of stock (a minority interest) in Rollins to a buyer (perhaps a large asset management firm, or a sovereign wealth fund).

A block sale is a privately-negotiated sale of public equities, off exchange. Such sales typically have little, if any, impact on the stock price of the company in question. The Rollins family would need a financial advisor to execute this sale for them.

If there is any fire to this smoke, this is what I think is going on.

I don’t see any industry or financial buyers attempting to acquire Rollins at what they would have to pay in order to get the deal done.

Could the Rollins family have tired of their business being a publicly-traded company and want to take it private? Sure, that’s a possibility. But the most likely explanation here, and the simplest one is the family has privately engaged financial advisors to execute on their estate planning goals.

I don’t think that there is a whole lot to follow here with regard to the story. Just like Rollins corporate headquarters, it’s pretty boring.

We briefly discuss the situation here.

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