Shares in UK-based pest control firm Rentokil have hit a record high after it agreed a $6.7bn (£5bn) deal to buy US rival Terminix Global.
The stock was 6% up at the market open in London on news of the cash and shares takeover but later fell back as the terms came into a sharper focus.
The deal was seen as scaling up Rentokil’s pest control business in North America and boosting its expertise in termite and residential services.
The takeover, which has the support of both boards, will see about 643.29 million new Rentokil shares issued to Terminix shareholders and $1.3bn (£984m) in cash.
It implies a value of $55 per Terminix share, representing a 47% premium to Monday’s closing price.
Terminix’s shareholders will own about 26% of the enlarged group, which will have a customer base of almost five million globally, employing about 56,000 people.
Rentokil said it expected the tie-up to generate cost savings of at least $150m by the third year after the close – expected in the second half of next year subject to shareholder and regulatory approval.
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Its chairman, Richard Solomons, and chief executive Andy Ransom will hold the same roles in the combined group.
Mr Ransom said of the agreement: “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”.
Russ Mould, investment director at AJ Bell, said of the deal: “We’ve got so used to UK companies being targets for overseas acquirers we almost forgot they could be predators as well as prey.
“Rentokil has delivered a stunning reminder with its multi-billion-pound takeover of US rival Terminix – a deal which so far seems to be getting a mixed response from the market. The shares were up initially but soon traded lower as investors digested the information.
“The company is paying a fairly chunky premium, though a significant component is accounted for by its own shares.
“Those shares are worth a lot more after a strong run during the pandemic when Rentokil’s hygiene and cleaning expertise has been in strong demand.”
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