Rentokil is buying Terminix of the United States in a $6.7 billion deal that would enable the UK company scale up and become a global pest control services behemoth serving both offices and households.
The transaction would be backed by $1.3 billion in cash and over 640 million Rentokil shares, according to the two businesses’ announcement on Tuesday. This implies a value of $55 per share for Terminix, a 47 percent premium over the stock’s Monday closing price.
Rentokil, a FTSE 100 corporation founded in the 1900s by a Danish pharmacist who discovered rat poison, has grown its business through acquisitions in recent years, but Terminix is the company’s largest to date.
Rentokil, the world’s largest pest control company, saw its stock rise 6% to a new high in early trade before reversing course and falling 5% by 1106 GMT.
“The prospect of a stronger market position in the United States is undoubtedly attractive for shareholders, but it might potentially irritate antitrust officials on the other side of the Atlantic,” AJ Bell analysts said.
In 2021, Britain saw a flurry of business mergers and acquisitions, with a number of notable deals involving a local target and a US bidder. Rentokil’s acquisition is one of the largest foreign firm acquisitions in the UK this year.
Rentokil Chief Executive Andy Ransom said, “This is an exciting and revolutionary combination that will create the global leader in commercial, residential, and termite pest management, as well as a leader in North America, the world’s largest pest control market.”
The $22 billion worldwide pest control market is expected to increase at a rate of 4.5 percent to over 5% in the medium term, according to the firms.
Rentokil and Memphis-based Terminix will combine to employ around 56,000 workers in 87 countries, with Terminix stockholders owning 26% of the combined company.
In the combined company, Rentokil Chairman Richard Solomons and CEO Ransom will keep their jobs. In the second half of 2022, the acquisition is scheduled to close.
Rentokil anticipates Terminix to add to its profitability in the first year, resulting in cost reductions of at least $150 million three years after the purchase is completed.
The London-based firm announced that American Depository Receipts would be listed on the New York Stock Exchange.
It has established a $2.7 billion loan facility with Barclays to finance the cash side of the transaction and restructure Terminix’s debt, according to the company.
Rentokil’s financial advisers were Barclays and Goldman Sachs, whereas Terminix’s was Lazard.
