Former BT CEO Philip Jansen is reportedly working on a private equity-backed offer to take over Rentokil Initial (LON:RTO), one of the leading pest control companies in the UK.
According to The Sunday Times, Jansen is in discussions with private equity firms, aiming to become the executive chairman of Rentokil, which has been struggling since a profit warning last October. Last month, activist investor Nelson Peltz revealed his position as a top-ten investor in the company.
The company’s shares surged more than 10% in London trading Monday.
Rentokil has faced difficulties after its $6.7 billion acquisition of the American company Terminix in 2022. The merger granted the combined entity a 30% market share in the U.S., but it also led to integration issues, including overlapping routes for extermination services.
Per the report, Jansen and his backers plan to address these integration problems and use Rentokil as a platform to acquire additional pest control companies in the U.S., potentially re-listing the company in the American market where similar businesses are valued higher.
A takeover bid for Rentokil could reach approximately £15 billion with a standard 30% premium, making it one of the largest recent mergers and acquisitions. Such a substantial deal would likely require multiple private equity investors.
While Rentokil offered no official comments on the deal, analysts at RBC Capital Markets said they would not rule anything out “given our view that the company is materially undervalued and there would be some logic in completing the integration behind closed doors.”
“However, we continue to believe that the current management team is doing the right things and believe it will execute on its plans to improve growth and to integrate Terminix – we expect the H1 results on Thursday to provide evidence of this,” they added.
While the report of a possible takeover is unconfirmed, RBC believes it could “help to provide a floor to the shares and to squeeze out any shorts.”
Jansen and private equity are not the first to propose an increased focus on the U.S. as a remedy for Rentokil's challenges.
Representatives from Peltz’s Trian Partners fund met with Rentokil’s management last month, suggesting that the company concentrate on the U.S. market and consider relocating its listing, following the example of other FTSE 100 companies like Flutter, the owner of Paddy Power.
They have advised Rentokil to exit markets where it is underperforming. Currently, Rentokil operates in over 90 countries. Trian has also reportedly pushed for a seat on the board and a change in the company's chief executive.