The plumbing industry was rocked March 23 when The ServiceMaster Co. announced it’s acquiring American Residential Services for approximately $92 million in cash and $180 million in assumed debt. The next phase of industry consolidation has arrived: consolidators acquiring other consolidators.

Under terms of the agreement, ServiceMaster (NYSE: SVM) will offer ARS (NYSE: ARS) a cash tender offer by March 28 for all of the outstanding shares of ARS stock at a price of $5.75 per share. The deal is subject to 52 percent of ARS shareholders tendering their shares under the offer and federal regulatory approval.

“We are excited to be joining forces with ServiceMaster,” said Thomas Amonett, president and CEO of ARS. “We believe this acquisition will provide the opportunities for our people to grow and develop, as well as the operational resources to grow the business.”

ServiceMaster - which was highlighted in PM’s March 1999 issue - will merge ARS with its plumbing company, Rescue Rooter. San Diego-based Rescue Rooter was acquired by ServiceMaster in January 1998, and currently has 26 locations in 12 states and $103 million in revenues.

Houston-based American Residen-tial Services operates in 59 markets in 17 states, and had approximately $559 million in annualized revenues. In the March issue, Rescue Rooter president Bill LeBaron predicted that by year-end the company would be twice as large as it was at the time of the purchase. When the deal is completed, Rescue Rooter will be more than five times its size.

“The acquisition of ARS continues our strategy of expanding our service network by acquiring platform companies that are servicing both commercial and residential customers operating in fragmented markets where there is an opportunity to organize and provide an efficient service system,” said ServiceMaster CEO Carlos Cantu. “In the last 14 months, with the acquisition of ARS, the 1998 acquisition of Rescue Rooter and [our landscape businesses], we have added over $1 billion in revenue and positioned Service-Master for an added dimension of growth in expanding new markets.”

Greg Capelli, an analyst with Credit Suisse First Boston, told The Chicago Tribune, “ServiceMaster is paying a fair price for a company that was mismanaged but that has been on the rebound. ServiceMaster has a track record of putting the right people in the right place to grow the companies they acquire.”

Capelli’s analysis appeared more timely as ARS announced its results for 1998. The company reported a $7.8 million loss, or $0.50 per share as it took a $3.4 million loss from a discontinued tent rental business. During 1997, ARS lost $4.7 million, or $0.33 per share.

ServiceMaster, headquartered in Downers Grove, Ill., serves more than 10.5 million customers in the United States and in 41 countries around the world, with annual customer level revenue exceeding $6.4 billion. ServiceMaster is a network of service companies with two major operating services, ServiceMaster Con-sumer Services and ServiceMaster Man-agement Services.

In addition to Rescue Rooter, its consumer services units include Terminix (pest control), TruGreen-ChemLawn (lawn care), Merry Maids (home cleaning), American Home Shield (home warranties), Furniture Medic (furniture repair and restoration), AmeriSpec (home inspections), Move Manager by ServiceMaster (moving) and ServiceMaster (home furnishings cleaning, janitorial services and disaster restoration).