French food services company Sodexo is considering the acquisition of U.S.-based facilities management and food service competitor Aramark as part of its strategy for international expansion, Bloomberg News reported Thursday.
While it’s unclear how many K-12 school districts currently contract with Sodexo or Aramark, they are known to be major players in the sector. Previous federal data suggests a sizable number of districts rely on food service management companies for K-12 school nutrition services.
In the 2017-18 school year, for instance, 26% of 562 surveyed school food authorities reported using a food service management company, according to the U.S. Department of Agriculture.
On Monday, both Sodexo and Aramark declined to comment to K-12 Dive when asked how many school districts each company contracts with.
The two firms’ performance in the education sector has been split, however.
While Aramark grew U.S. revenue in its education vertical 7% year over year to nearly $780 million in its third fiscal quarter, revenue for Sodexo’s education vertical rose just 2.4% in this third fiscal quarter.
Sodexo attributed the subdued growth to an unfavorable calendar impact in universities and a drop in the number of sites of a large school contract. Despite this contract loss and the lack of a big request for proposal from universities at the time of its third quarter earnings, “it's a very active education season” in the U.S., Sodexo CFO Sebastien de Tramasure said on an earnings call in July, pointing to potential new wins.
Sodexo recently entered into a 10-year partnership with Virginia-based Emory & Henry College, which will expand the food service provider's responsibility from food service to a “wide range of facility-related functions.”
Aramark could provide a “helpful growth engine with meaningful synergies for Sodexo, which has lagged its peers in recent years,” Jefferies Financial Group analyst Allen Wells said in a report Thursday, according to Bloomberg.
Wells noted that the rise in Aramark shares would mean that its potential acquisition by Sodexo could approach “a merger of equals.”
The deal would require Sodexo to raise significant equity and debt financing, Wells said. Any potential transaction could face antitrust scrutiny, meaning there is no certainty that the talks, which have been ongoing for months, would lead to a transaction, Bloomberg reported.
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