16th Dec 2016 09:03
LONDON (Alliance News) - Pest control firm Rentokil Initial PLC on Friday announced plans to hive off a portion of its Workwear and Hygiene units into a new joint venture, increasing its focus on its buoyant pest control business.
Rentokil said it will get around EUR520.0 million in cash and an 18% stake in a new joint venture company being created together with Germany's Haniel & Cie Holding Co.
The venture will involve Rentokil's Workwear and Hygiene units in Belgium, Netherlands, Luxembourg, Germany, Austria, Switzerland, Czech Republic, Slovakia, Poland and Sweden. They will be merged with Haniel's CWS-Boco business, which has operations in 17 European countries.
The deal will be carried out by the transfer of the Rentokil businesses into CWS-Boco. Rentokil said the pair intend to complete the deal by mid-2017.
Rentokil will received an annual fixed dividend of EUR19.0 million for five years following completion. Rentokil expects to keep its stake in the venture for a minimum of three years and for an anticipated period of five years, after which it will have various options at its disposal to exit entirely.
The UK-based group will retain its pest control, plants, specialist hygiene, premium scenting, medical dental and other operations in the countries which will transfer to the CWS-Boco business, plus its Workwear and Hygiene divisions in France.
Rentokil said its Workwear and Hygiene arms are a good fit with CWS-Boco and said the money it receives from the agreement will be used to invest further in its core Pest Control business and remaining Hygiene services operations, focused on growing and emerging markets. It intends to spend GBP100.0 million on acquisitions in 2017 to pursue this strategy.
"We are delighted to announce this joint venture with Haniel, a high-quality organisation with people who share our drive for value creation, respect for colleagues and passion for customer service. This is the right deal at the right time and the next step in the implementation of our Right Way plan," said Rentokil Chief Executive Andy Ransom.
"Overall, I believe there is a compelling logic in bringing our respective Workwear and Hygiene businesses together in these European markets, freeing up capital to invest in our higher-growth markets and delivering value for our shareholders," Ransom added.
Rentokil also noted its expectations for 2016 remain unchanged.
The Pest Control arm has been the key focus for Rentokil in recent years. In 2015, the group substantially increased its presence in the North American pest-control market when it paid USD425.0 million to buy Steritech Group Inc, a Charlotte, North Carolina-based pest control company.
The Steritech deal followed Rentokil's purchase of 12 pest control firms via bolt-on deals in the first half of 2015 and came ahead its purchase of four more pest control companies in January of this year. Then, in July, it bought US pest control and turf products distribution company Residex LLC for USD30.0 million in cash, further increasing not only the contribution to sales from pest control but also increasing its exposure to North America.
Rentokil now generates around 90% of its revenue from outside the UK and, updating in October on trading in the third quarter of 2016, it had reported 32% growth in revenue year-on-year, boosted by translating US dollar sales into a weak pound.
The pest control focus even took a turn to the burgeoning internet of things world back in July when Rentokil signed a collaboration with US technology giant Google and PA Consulting to roll-out connected rodent control products for the food and pharmaceutical industries. The products have embedded sensors and mobile connectivity to automatically alert customers when rodents are present.
By Sam Unsted; [email protected]; @SamUAtAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
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