By Yadarisa Shabong
- Rentokil is buying U.S. rival Terminix in a $6.7 billion deal that will help the UK company build scale and create a global pest control services giant serving both offices and homes.
The deal will be funded by $1.3 billion in cash and by more than 640 million Rentokil shares, the two companies said in announcing the deal on Tuesday. That implies a value for Terminix of $55 per share, or a 47% premium to Terminix's Monday closing price.
Rentokil, a FTSE 100 company which traces its roots to a Danish pharmacist discovering rat poison in the 1900s, has in recent years expanded its business via mergers, but Terminix marks its largest deal yet.
Shares in Rentokil, the world's largest pest control company, climbed 6% to a record high in early trade before reversing course and were down 5% by 1106 GMT.
"The promise of a stronger market position in the U.S. is obviously exciting for shareholders but could also draw the ire of antitrust regulators across the pond," analysts at AJ Bell said.
Britain has seen some fervent corporate dealmaking in 2021 with many prominent transactions involving a local target and a U.S. buyer. Rentokil's deal is one of the largest UK acquisitions of a foreign company this year.
"This is an exciting and transformational combination that will create the global leader in commercial, residential and termite pest control, and a leader in North America, the world's largest pest control market," Rentokil Chief Executive Andy Ransom said.
The $22 billion global pest control market should grow at between 4.5% and over 5% over the medium term, the companies said.
The combination of Rentokil and Memphis-based Terminix, in which the U.S. company's shareholders will own 26%, will employ about 56,000 people across 87 countries.
Rentokil Chairman Richard Solomons and CEO Ransom will retain their roles in the combined group. The deal is expected to close in the second half of 2022.
Rentokil said it is targeting cost savings of at least $150 million three years after the deal closes and expects Terminix to add to its earnings in the first year.
The UK-based company said it would list American Depository Receipts on the New York Stock Exchange.
It has set up a debt facility of up to $2.7 billion with Barclays to finance the cash portion of the deal and refinance Terminix's debt, it said.
Barclays and Goldman Sachs were Rentokil's financial advisers, while Lazard advised Terminix.