Investment firm Mantle Ridge LP is exploring forming a consortium with private equity firms and sovereign wealth funds to make an offer for U.S. food services company and Avoca owner Aramark, people familiar with the matter said on Thursday.
Mantle Ridge, which was founded by former Pershing Square Capital Management LP partner Paul Hilal, would be attempting one of the biggest leveraged buyouts since the financial crisis if it goes ahead with an offer.
Aramark has market value of about $8.6 billion and a debt pile of more than $7 billion.
Mantle Ridge plans to push Aramark to explore a sale, and has also held preliminary talks with banks about raising debt financing for the bid, the sources said.
There is no certainty the bid will materialize, the sources added.
Mantle Ridge and Aramark did not immediately respond to requests for comment.
Aramark shares rose on the news to end trading on Thursday up 6.6% at $34.89.
How much capital Mantle Ridge would be able to contribute towards a bid was unclear.
The firm does not disclose its assets under management on its website, but its only big holding, a stake in railroad operator CSX Corp, was worth $2.85 billion as of the end of March, according to the firm's most recent filing with the U.S. Securities and Exchange Commission.
Hilal has a history of convincing investors to back his bets on companies, having raised $1.2 billion in 2016 to build Mantle Ridge's stake in CSX.
By seeking to put together an offer for Aramark, Mantle Ridge would be putting pressure on the company to explore a sale, emulating the tactics of other activist investors that use this approach, including hedge fund Elliott Management Corp and billionaire Carl Icahn.
It was not clear if Mantle Ridge has already amassed a stake in Aramark. If the firm does build a stake, it could benefit if its bid does not prevail but another party buys the company.
Based in Philadelphia, Aramark is a provider of food and uniforms to education, healthcare, business, sports and leisure establishments. Its main competitors include Cintas Corp and UniFirst Corp.
Aramark has been trying to grow its business in the face of increasing competition and tight labor markets.
It has had private equity ownership twice before, the last time in 2006 in an $8.3 billion buyout by then-Chairman Joseph Neubauer with the help of a consortium that included Goldman Sachs Capital Partners, CCMP, JPMorgan Partners, Thomas H. Lee Partners and Warburg Pincus.
As a result, many of the cost savings that private equity investors would typically achieve in a buyout have been realized.
After leaving Pershing Square in 2016, Hilal placed a bet through Mantle Ridge on CSX by agitating to install former Canadian Pacific President Hunter Harrison as CEO.
While Harrison died unexpectedly less than a year into his four-year contract, his involvement put the company on track for a turnaround that boosted CSX's stock and generated strong returns for Mantle Ridge.