Sodexho, the new kid, arrives smiling Stock rises 5on its first day


March 31, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Chuck O'Dell sees the business world of the future as one of corporate downsizing and outsourcing, and that's just the way the chief executive of Sodexho Marriott Services Inc. hopes it will be.

For if the prevalent business trends of the 1990s continue, Sodexho Marriott believes that it will be in an ideal spot to capture a significant portion of a $157 billion market to provide housekeeping, landscaping, food, facilities management and other services.

And, at least initially, Wall Street agreed, sending the former Marriott International Inc. subsidiary's common stock up 50 cents a share to $26.625 during its first day of trading yesterday.

In O'Dell's crystal ball, corporations, public school systems, universities and health care facilities will need increasingly turn to professional service providers, to focus on their core operations and save money.

"From a corporate perspective, their job is to make widgets," O'Dell said. "But they still have a lot to do to run an operation, so they want someone who will do those things as well as they make widgets. They're looking for a professional for support services."

That's where Sodexho Marriott -- a combination of the Bethesda-based lodging giant's services arm and the North American operations of a French catering company -- comes in.

O'Dell contends that the market is ripe to explode, since only 17 percent of such services are currently contracted out, and only a few competitors are grappling for the market.

"The demographics are just coming into place for these trends to happen," O'Dell said.

Moreover, its dominant position -- Sodexho Marriott opens with $4.2 billion in assets, more than 4,800 accounts and 100,000 employees -- is expected to allow the company to offer multiple services that competitors such as Aramark and Johnson Controls can't or don't, such as janitorial services.

But despite its many positives, convincing the investment community that Sodexho Marriott is worth committing money to may not be as easy.

Mark Brockway, an analyst at Institutional Investment Services Inc., is typical of shareholder consultants who have focused on the spinoff.

"It will allow Marriott International to focus on their core lodging business," Brockway said. "But I haven't really been following the Sodexho Marriott end of it."

The new company also will have to contend with $1.3 billion in debt that its former parent decided to shed as part of the spinoff. O'Dell said Sodexho Marriott is "comfortable" with the debt level, and expects to reduce its leverage by roughly $100 million a year through 2003.

"We're positioning ourselves as the dominant player in the industry, with recognized brand names and global solutions," O'Dell said.

Pub Date: 3/31/98

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