(Bloomberg) -- Elis SA, the Paris-listed provider of uniform and linen cleaning services, has scrapped acquisition talks with two US competitors.
The French company held discussions with both UniFirst Corp. and Vestis Corp. as part of its exploration of an entry into the US market, it said in a statement Friday following a Bloomberg News report. Talks with both companies have now been terminated, as “neither would have allowed Elis to complete a transaction that would be in line with the company’s strict financial discipline.”
Shares of Elis gained as much as 15% on Friday after the announcement and were up 10% at the close in Paris, giving it a market value of €4.8 billion ($5.3 billion). UniFirst shares were down 0.7% at 12:23 p.m. in New York, giving it a market capitalization of about $3.6 billion, while Vestis is valued at $1.9 billion.
“Elis therefore remains focused on its strategy combining organic growth and value-creating acquisitions,” it said in the statement, adding that it will continue to look at opportunities in new markets.
People with knowledge of the matter said earlier that Elis had made an informal takeover proposal to UniFirst. Massachusetts-based UniFirst reached out to Elis to gauge its appetite for a deal after Elis’s takeover approach to rival Vestis became public last month, said the people, who asked not to be identified because discussions are private.
The French company made a non-binding proposal for UniFirst, whose board rejected it in recent days, and the companies aren’t currently in talks, the people said Thursday.
UniFirst said in a statement Friday it’s in regular contact with other industry players. UniFirst reached out to Elis to better understand market rumors related to its potential US entry, not with the intention of soliciting an offer, it said. Discussions with Elis have ended and UniFirst doesn’t currently anticipate holding further talks with the French company, the US company said in the statement.
Elis confirmed about a month ago that it had made a preliminary approach to Vestis after Reuters first reported the interest. The French suitor’s shares plunged 16% in a single day after the possible deal became public.
Since then, Vestis has attracted interest from other parties including private equity firms, the people said. The company is working with advisers to assess the situation, they said. Options include staying independent and a sale. Deliberations are early stage and there’s no certainty they will lead to a transaction.
A deal by Elis would have added to a flurry of French M&A appetite to expand in the US. Paris-listed catering firm Sodexo SA has been exploring a potential acquisition of US rival Aramark as it seeks growth overseas, people familiar with the matter said last month. French dairy companies Groupe Lactalis and Sodiaal agreed to buy General Mills Inc.’s North American yogurt business for $2.1 billion last month.
Elis Chief Executive Officer Xavier Martire made the move for Vestis after the US firm cut its fiscal-year revenue growth and profitability guidance in May, sending its shares to a record 45% plunge in a single day.
Elis said at the time that any deal would have to meet its commitments to shareholders. Those include maintaining an investment-grade credit rating and making sure the purchase adds to earnings per share in the first year.
UniFirst’s founding Croatti family controls more than 70% of the combined voting power of its two classes of stock, according to the company’s annual report. UniFirst was started in 1936 when Aldo Croatti founded a laundry business to clean factory workers’ clothes, which eventually turned into a leading uniform rental service. The company serves more than 300,000 customers and outfits over 2 million workers across industries including automotive, transportation warehousing and construction.
(Updates with UniFirst statement in seventh paragraph.)
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