Rentokil to Buy Terminix in $6.7 Billion Pest-Control Deal

(Bloomberg) -- Rentokil Initial Plc agreed to buy Terminix Global Holdings Inc. to expand in the U.S., the world’s largest pest-control market.

The stock-and-cash transaction values the company at $6.7 billion with an implied price of $55 a share, according to a statement. That’s a premium of 47% over Terminix’s last close. Both boards backed the deal, which ranks as Rentokil’s largest-ever acquisition.

Terminix, which eliminates pests ranging from rats and cockroaches to scorpions, is among the most recognized U.S. brands in termite services. The transaction will allow Rentokil to increase scale as well as cut costs, and will start boosting earnings one year after completion, the companies said. 

Rentokil shares sank 11% in London trading, erasing an earlier gain of 6%. Under the terms of the agreement, the U.K. buyer will issue about 643 million new shares, including American depositary ones. Terminix rose as much as 30% in New York to a high of $48.69.

Terminix shareholders will own about 26% of the enlarged company, which will trade on the London Stock Exchange and New York Stock Exchange. They can elect to receive cash or shares in the transaction. Rentokil plans to pay 20% of the overall purchase price in stock. 

Overseas Deals

The transaction marks a rare overseas deal for a U.K. company at a time when investors have been discouraging London-listed firms from making bold acquisitions. Among the few such deals to be announced this year are Entain Plc’s takeover of Swedish online gambling company Enlabs AB and Anglo-Australian miner BHP Group’s bid for Canadian nickel explorer Noront Resources Ltd.

Terminix shares had declined 27% this year through Monday’s close.

Rentokil garners about 60% of its revenue from pest control and most of the 228 businesses it has acquired since 2016 were in that field. The market for pest eradication continues to grow, fueled by population growth, urbanization and climate change, according to the company.

Terminix said last month that it’s struggling with higher costs due to tight labor markets and medical expenses brought on by Covid-19, although profit margins are still growing. In another pandemic ripple, demand for bed-bug control picked up last quarter as people resumed travel. 

Rentokil worked with Barclays Plc and Goldman Sachs Group Inc. while Terminix was advised by Lazard Ltd.

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