30th Nov 2006 07:01
Rentokil Initial PLC30 November 2006 30 November 2006 RENTOKIL INITIAL ACQUIRES TARGET EXPRESS TO CREATE LEADING OVERNIGHT PARCEL DELIVERY BUSINESS Rentokil Initial plc today announces that it has, through a subsidiary, made anoffer to the shareholders of Target Express Holdings Limited ("Target Express")to acquire the entire issued share capital of Target Express on a cash anddebt-free basis for a cash consideration of £210 million, to be satisfied fromexisting resources. This offer is unconditional and acceptances have beenreceived in respect of 90% of the share capital with the balance expected nolater than the end of the year. Target Express provides a full range of premium parcel delivery services forcustomers throughout the UK, with its main focus on overnight timed deliveries.It operates from 39 branches with a main hub in Coventry. Revenue has grownstrongly in the business under the new management team that took charge in 2002.Turnover and operating profit (before amortisation and exceptional items) ofTarget Express for the year to 30 April 2006 were £146.1 million and £17.3million respectively. City Link, Rentokil Initial's existing parcel delivery business, also focuses onthe UK overnight timed delivery market and had network turnover of £240 millionin 2005. City Link has seen parcel volumes and revenue grow faster than themarket every year for the last decade. In October 2005, the company announcedits intention to buy back and integrate the City Link franchises and now owns80% of the network (56 franchises); a further 13 franchises will be repurchasedduring 2007 in order to complete the buy back programme. City Link's managementteam has been highly successful in integrating these operations into itsexisting network. Target Express and City Link are highly complementary businesses with similaroperating models and both have a strong culture based on customer service andoperational excellence. Both businesses have outstanding management teams whichare well attuned to the requirements of their market. Bringing them togetherwill create a leading overnight parcels operator able to meet the increaseddemands of current and prospective customers in a dynamic marketplace. Theintegrated business will provide a wider range of services including same daydeliveries, overseas deliveries, international mail and fulfilment. Customerhandling processes including track and trace will also be enhanced. Through these enhancements to customer service and product offerings, theintegrated business is expected to continue to grow parcel volumes and revenuesat an above-market rate. In addition, City Link management believes thatsynergies at an annual run rate of at least £10 million will be achieved by theend of 2008. These synergies will be realised through operational integrationand investment in IT, resulting in improved network efficiencies and back officesupport functions. The integration cost of this investment is expected to be£12 million, most of which will be incurred in 2007 and 2008. In forming theseviews, management has taken into account advice received from Deloitte & ToucheLLP which has performed an independent review of the benefits case for RentokilInitial. The combined business will handle some 340,000 parcels per day. Operationalintegration of the businesses will commence in mid-2007 following investment inan integrated IT platform. In the meantime, both businesses will continue tooperate as normal. Doug Flynn, Chief Executive Officer of Rentokil Initial plc, said: "Both CityLink and Target Express deliver high quality customer service and outstandingreliability. Together, they will create a leader in the premium overnightparcels market, able to meet the future needs of customers and develop newproducts and services. "In the past year, we have made great progress along the path of transformingCity Link into a fully integrated parcels delivery service through the buy backof the franchise businesses; today's announcement is a logical next step in thedevelopment of the business. This acquisition is consistent with our strategyof creating value for our shareholders by focussing Rentokil Initial onbusinesses with strong market positions which offer the prospect of sustainable,profitable growth." - Ends - Notes to Editors Target Express • Turnover and operating profit of Target Express for the year to 30April 2006 were £146.1 million and £17.3 million respectively. The cash anddebt-free net assets (excluding goodwill of £37.5 million) at 30 April 2006 were£4.0 million. The book value of the gross assets the subject of thistransaction is £73.1 million, including goodwill. Note: Target Express figures are prepared under UK GAAP. Operating profit is stated before goodwill amortisation and exceptional costs. • Target Express was previously acquired in February 2000 by itsmanagement with backing from 3i plc and other investors. • Executive directors Petar Cvetkovic and Keith Broom of Target Expresswill remain in the business post completion. City Link • City Link's network turnover in 2005 was £240 million. Revenue of thebusiness was £126 million and operating profit was £29 million. In the thirdquarter of 2006, its organic revenue growth was 7.6% and revenue grew by 65%including acquisitions. • City Link currently operates a national network through 69 branches ofwhich 13 are still managed by franchisees. It is intended to complete the buyback of these remaining franchises during 2007. Rentokil Initial Rentokil Initial is one of the largest business services companies in the world,operating in all the major economies of Europe, North America, Asia Pacific andAfrica. The company has some 70,000 employees providing a range of supportservices in over 40 countries where the 'Rentokil' and 'Initial' brands havecome to represent innovation, deep expertise and consistent quality of service.Services include textiles and washroom services, pest control, tropical plants,electronic security, parcels delivery and facilities services. For further information, please contact: Rentokil Initial plcMalcolm Padley, Corporate Communications - 020 7866 3027/ 07788 978 199Lisa Williams, Investor Relations - 020 7866 3028/07980 895 419 Brunswick GroupKate Holgate - 020 7404 5959/07974 982402Jon Rhodes - 020 7404 5959/07834 502361 A conference call for investors and analysts will be held today at 9:30am. Thedial-in numbers for this call are: +44 (0) 20 7365 1854 (UK) and +33 (0) 1 70 9942 67 (France). A recording will be available on replay for the next threeweeks. The access numbers for this service are: +44 (0) 20 7806 1970 (UK), +33(0) 1 71 23 02 48 (France), +1 718 354 1112 (US) and +852 3002 1607 (Hong Kong).The PIN for all replay numbers is 7805044#. This announcement contains statements that are, or may be, forward-lookingregarding the group's financial position and results, business strategy, plansand objectives. Such statements involve risk and uncertainty because theyrelate to future events and circumstances and there are accordingly a number offactors which might cause actual results and performance to differ materiallyfrom those expressed or implied by such statements. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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