SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20547
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 1, 1997
SERVICEMASTER LIMITED PARTNERSHIP
(Exact name of registrant as specified in its certificate)
Delaware 1-9378 36-3497008
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One ServiceMaster Way, Downers Grove, IL 60515
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(Address of principal executive offices)
Registrant's telephone number, including area code: (630) 271-1300
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Item 5. Other Events
Share Repurchase Transaction with WMX Technologies, Inc.
On April 1, 1997, ServiceMaster Limited Partnership
("ServiceMaster") purchased (i) the 27,160,715 restricted
ServiceMaster shares theretofore owned by WMX Technologies,
Inc. ("WMX") and (ii) the option theretofore currently held
by WMX to acquire an additional 1,875,000 ServiceMaster
shares in accordance with the previously announced agreement
between ServiceMaster and WMX entered into on February 18,
1997 and reported on ServiceMaster's Form 8-K dated February
18, 1997. The combined purchase price for both the shares
and the option was $625,978,141.
ServiceMaster used bank debt financing for the transaction
in the short term. Subject to market conditions,
ServiceMaster currently anticipates that approximately fifty
percent of the funds needed for the foregoing transaction
and the acquisition of Barefoot Inc. which was closed in
late February 1997 will be refinanced with equity issuances
over the next twelve to eighteen months.
The ServiceMaster shares which were repurchased from WMX
were priced at approximately $23 per share (calculated as if
the option had been exercised and ServiceMaster had
purchased both the outstanding shares owned by WMX and the
shares issuable upon exercise of the option). This
represented a discount from the $25.375 price per share at
which ServiceMaster shares closed on the New York Stock
Exchange on February 18, 1997 (the last trading day
preceding the announcement of the WMX repurchase transaction)
and a discount from the $27.25 price per share at which
ServiceMaster shares closed on the New York Stock Exchange
on March 31, 1997 (the last trading day preceding the
closing of the transaction).
In addition, ServiceMaster has obtained a significant tax
benefit from the transaction because ServiceMaster, under
Internal Revenue Code Section 734, will be entitled to
increase the tax basis in its assets by the difference
between the purchase price of $625,978,141 and WMX's tax
basis in the ServiceMaster shares. There is no
corresponding adjustment to the book basis of the assets as
reported in ServiceMaster's financial statements and
therefore there will be no incremental amortization expense
in the income statement. ServiceMaster estimates that this
transaction will generate approximately $480 million of
incremental tax basis. The step-up in tax basis can be
taken as a tax deduction over the next 15 years, which
generates an incremental tax deduction of approximately $32
million per year. The step-up in tax basis provides cash
flow benefits, but does not impact the provision for income
taxes. The incremental cash tax savings, assuming a 40%
rate, which resulted from the WMX transaction is
approximately $13 million per year.
The pro forma effects of the share and option repurchase
transaction with WMX on the Registrant's balance sheet as of
September 30 1996 were reflected in the pro forma financial
information which accompanied ServiceMaster's Form 8-K dated
February 18, 1997 (the "February 8-K"). If such pro forma
effects were reflected as of December 31, 1996, it would not
be materially different from the pro forma balance sheet
which was a part of the February 8-K. As presented in the
February 8-K, the pro forma effects of the share and option
repurchase transaction with WMX was additive to the
Registrant's earnings per share for the nine months ended
September 30, 1996, and such pro forma effects would also be
additive to earnings per share for the year ended December
31, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
Dated: April 4, 1997
SERVICEMASTER LIMITED PARTNERSHIP
By: /s/ Vernon T. Squires
______________________________
Name: Vernon T. Squires
Title: Sr. Vice President and General Counsel
