ServiceMaster enters into an agreement to acquire InStar Services Group

DOWNERS GROVE, III. -(BUSINESS WIRE)- Feb. 2, 2006 - Reprinted with permission

ServiceMaster (NYSE:SVM) announced today several actions designed to increase shareholder value. To expand its successful disaster restoration business, the Company has entered into an agreement to acquire InStar Services Group, which is engaged in the commercial disaster response and reconstruction business. The Company also announced its intention to sell its American Residential Services (ARS) and American Mechanical Services (AMS) companies so it can concentrate resources on its main growth businesses. The Company also announced the launch of Project Accelerate, which is designed to increase the efficiency and effectiveness of all business and field support functions.

Acquisition of InStar Services Group, Inc.

The Company announced today a strategic expansion of commercial disaster restoration through the proposed acquisition of InStar Services Group, Inc. The Company expects to complete the acquisition of InStar during the first quarter after clearing antitrust review. With estimated fiscal year 2005 revenues of approximately $130 million, InStar is a leading direct provider of commercial disaster response and reconstruction services in the United States. InStar provides a continuum of services, from planning prior to an event, to emergency response following the event and continuing service through cleaning, recovery and reconstruction--a customer relationship that can span more than 18 months.

"The acquisition of InStar will complement the services of ServiceMaster Clean and changes the game in the commercial disaster response and restoration market," said Jonathan Ward, Chairman and Chief Executive Officer. "Combining the capabilities of InStar with ServiceMaster Clean will create a single source solution for the delivery of comprehensive commercial loss services on a national basis, and an opportunity for our customers to significantly reduce business interruption."

In the delivery of services to national, regional and local customers, InStar will handle the work directly or in combination with ServiceMaster Clean franchisees. Currently, InStar has 24 offices covering 28 states in the Southeast, Southwest, Mid-Atlantic and Northeast Regions and has the ability to mobilize a work force and manage projects nationwide. ServiceMaster Clean, the market leader in residential disaster restoration, has over 1,000 disaster restoration facilities in the United States and Canada. By combining their capabilities, they will be prepared to deliver the full spectrum of services to both commercial and residential customers.

Sale of ARS and AMS

The Company announced that it is exploring alternatives for American Residential Services (ARS) and American Mechanical Services (AMS) including the sale of both businesses. The Company has retained William Blair & Company as its financial advisor to assist in this process. The Company has stated that it does not expect to disclose developments concerning the status of this process unless and until it and its Board of Directors has approved a definitive transaction. "Our best opportunity to build shareholder value is to have fewer priorities and to pursue them with greater intensity. We have applied that thinking to both our strategies and our portfolio," said Ward. "This action reflects the Company's continued commitment to brands which have the ability to achieve sustainable national market leadership and a high potential to achieve significant and consistent growth in share, revenue and return on capital."

Future-State Business Model

The Company also announced the launch of Project Accelerate, an internal, multi-phase reengineering project designed to improve the effectiveness and efficiency of all functional support areas. Upon completion, Project Accelerate will result in an organization that is better aligned to respond faster to the marketplace, its customers, and provide better day-to-day support for front line associates who are in the homes and businesses of customers every day.

"This project is consistent with our goal of becoming systematically stronger and is expected to have a positive financial impact on the enterprise," said Ward. "The reduction in direct support costs, combined with more effective purchasing of outside services and other cost reductions, is targeted to produce annualized savings in the range of $50-75 million. The result of this project will be a smaller, yet more effective support organization which is appropriately focused on our best growth opportunities."

The Company plans to execute the majority of the project during 2006 and early 2007, with ultimate annualized saving levels achieved in the second half of 2007. During this time, a significant portion of the savings will be reinvested in initiatives to reach and keep more customers, and offset rising factor costs.

Conference Call Details

The Company will review these actions and discuss its outlook in a call at 2:00 p.m. CT on February 2, 2006. Interested parties may listen to the call at (800) 263-9155. The conference call will include Jon Ward, Chairman and Chief Executive Officer, and Ernie Mrozek, President and Chief Financial Officer. The call will be broadcast live and can be accessed at the ServiceMaster web site, www.svm.com. The call will be archived on the site for 30 days and may also be accessed for seven days at (800) 633-8284 (#21282889).

ServiceMaster currently provides outsourcing services for residential and commercial customers through a network of over 5,500 company-owned and franchised service centers and business units operating under leading brands, which include Terminix, TruGreen ChemLawn, TruGreen LandCare, ARS Service Express, Rescue Rooter, American Mechanical Services, ServiceMaster Clean, American Home Shield, Amerispec, Merry Maids, and Furniture Medic.

As America's Service Brands for Home and Business, the core service capabilities of the Company include lawn care and landscape maintenance, termite and pest control, home warranty, disaster restoration, cleaning, furniture repair, plumbing, heating and air conditioning services.

InStar is currently owned by an investor group led by TowerBrook Capital Partners L.P., a private equity firm with offices in New York and London. Morgan Keegan & Company, Inc. served as financial advisor to InStar and TowerBrook.

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