Reuters News

ATLANTA — National Service Industries Inc. will sell 29 plants and assets related to its uniform rental business to G&K Services Inc. for about $287 million, the companies said Monday.

The deal will boost G&K's market position in the Southeast and make it the third-largest supplier in the uniform leasing industry, with anticipated revenues in excess of $500 million in the fiscal year beginning July 1, 1997, it said.

The assets sold represent about 40 percent of National Service's textile rental volume, the company said. All but five of the plants are in the Southeast, G&K said.

National Service, which also has businesses in lighting equipment, speciality chemicals and envelopes, said the sale follows a year-long review of its textile rental operations.

The Atlanta-based company will now focus on improving the profitability of its core linen operations, it said.

"We believe it makes good business sense ... to stay in the general linen markets, but only in those geographic areas and segments where the potential for future economic profit is clear," it added.

National Service said its remaining textile business will have about 60 percent of fiscal 1996's sales — which totalled $531 million — and 50 percent fewer assets.

The deal is expected to close before Aug. 31, subject to antitrust regulatory approval. The sale price is subject to adjustment after a post-closing audit, the companies said.

National Service said it will use cash proceeds from the sale to invest in short-term markets and fund its share repurchase programmes, among other things.

Although the company expects to record a pretax gain from the sale during its fourth quarter, it said the gain would likely be offset by reserves.

National Service also said its board of directors has authorised the repurchase of an additional 1.25 million shares, on top of an earlier programme for up to 2 million shares.

As of March 19, it had about 45.0 million average shares outstanding.

National Service's stock fell 50 cents to $43.375 on the New York Stock Exchange at midday. G&K, based in Minneapolis, fell $2 to $30.75 on Nasdaq.

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