SOURCE: SEIU

April 30, 2007 16:04 ET

SEIU: CD&R's Service Master Bid May Spark Fresh Debate About Private Equity Buyouts' Environmental Impact

WASHINGTON, DC -- (MARKET WIRE) -- April 30, 2007 -- Note: SEIU members participate in pension funds with more than $1 trillion in assets, most of which invest 5 percent to 10 percent of their assets in private equity. SEIU is a longtime advocate of responsible corporate governance practices and an active member of the Council of Institutional Investors, an organization of more than 130 pension funds whose assets exceed $3 trillion. The following represents the view of SEIU.

Clayton, Dubilier & Rice's (CD&R) $4.8 billion-dollar buyout of Service Master raises serious questions about Service Master's subsidiary TruGreen Chemlawn and its use of toxic lawn care products. To track the deal, go to http://www.servicemasterrevealed.blogspot.com/

The buy out raises questions about how CD&R will resolve the ongoing controversy over the use of toxic chemicals by TruGreen Chemlawn. In May, Service Master shareholders are expected to vote on a shareholder resolution requesting a report on the feasibility of discontinuing the use of synthetic pesticides at TruGreen Chemlawn and substituting natural and nontoxic lawn care services.(1)

The ServiceMaster deal comes on the heels of an accord between environmentalists and private equity firms over the announced buyout of Texas energy giant TXU. Environmental Defense and National Resources Defense Council (NRDC) won concessions from TXU's buyers, Kohlberg, Kravis and Roberts, and TPG, to shelve eight of the company's planned coal-fired energy plants and adopt a series of initiatives in exchange for the environmental groups' support of the TXU buyout.(2) Environmental Defense and NRDC hailed this agreement as a turning point in the environmental movement's fight for cleaner energy.(3) However, other environmental groups, such as Native Forest Council and Green Delaware consider the agreement gives cover to TXU's buyers without extracting meaningful reforms.(4) CD&R's buyout of ServiceMaster could spark further debates about the impact of private equity owned companies on the environment.

The private equity buyout industry, armed with more than a half-trillion dollars of capital, is today engineering financial deals that together are larger than the annual budgets of most of the world's countries. This financial juggernaut is generating hefty returns to its investors, extraordinary riches for its executives, and newly relevant questions about the impact of its business practices on American workers, businesses, communities, and the nation.

Last week, SEIU released a set of principles designed to address the concerns of investors, the public, and workers including:

--  The buyout industry should play by the same set of rules as everyone
    else, including providing transparency and disclosure about their
    businesses,  and eliminating conflicts of interest and other potential
    abuses in their transactions;
--  The public, including workers directly affected by the deal and
    consumer organizations, should have a voice in the deals and benefit from
    their outcome; and
--  Community stakeholders should have a voice in the deals and benefit
    from their outcome.
    
(1) http://www.sehn.org/web2printer4.php?img=0&lnk=0&page=tccfiduciary_guide.html

(2) Barringer, Felicity and Andrew Ross Sorkin, "In Big Buyout, Utility to Limit New Coal Plants." New York Times, February 25, 2007.

(3) "TXU: A Green Deal as Big as Texas. Environmental Defense helps usher in a new era of cleaner energy." Environmental Defense, March 2, 2007, http://www.environmentaldefense.org/article.cfm?contentID=6025&campaign=583; Record TXU Buyout Includes Unprecedented Global Warming, Emissions Plan. Outside Advocates Help Engineer Course Change Toward Clean, Efficient Vision; Bold Move Signals Beginning of the End for Old-Style Coal Investment in U.S. National Resources Defense Council, February 24, 2007, http://www.nrdc.org/media/2007/070226.asp.

(4) Smith, Rebecca and Jim Carlton, "Environmentalist Groups Feud Over Terms of the TXU Buyout." The Wall Street Journal, March 3, 2007, http://online.wsj.com/article/SB117288717808325631-search.html?KEYWORDS=txu+deal&COLLECTION=wsjie/6month.

Contact Information

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    Renee Asher
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