United Tech To Buy Rentokil Unit For $1.2 Billion
Rentokil Initial, whose services range from catering to pest control, said on Friday it received a 595 million pounds ($1.2 billion) offer from U.S. conglomerate United Technologies for its Initial Electronic Security Group.
Britain's Rentokil, whose businesses include rat catching and tropical plant rental, said the cash deal was expected to be completed before the end of June, and the proceeds would be used to reduce debt.
Charles Stanley and UBS analysts had forecast the division could fetch around 500 million pounds.
However, Panmure Gordon analysts said the price was slightly below their expectations but following the sale the group was more focused and could become a takeover target.
"The sale price of the Electronic Security business was slightly below our expectations, but the important point is that the group is now more focused and is more easily digestible should a predator emerge," they said.
After fending off an attempt by British businessman Gerry Robinson to install himself as executive chairman and return cash to shareholders in 2005, Rentokil embarked on a new strategy.
The company has offloaded its U.K., Canadian, U.S. and Belgian guarding businesses in the year as well as its Initial Style Conferences business as it focuses on more profitable areas including its largest unit, Textiles and Washroom Services.
"Completing this transaction will be a significant step towards focusing our resources on those businesses where we are best positioned to create additional value for shareholders," Chief Executive Doug Flynn said.
Earlier in March, Rentokil rebranded its tropical plants rental unit to boost revenues and profits but analysts at Seymour Pierce said the move could be a precursor to its sale, which they estimate could fetch up to 85 million pounds.
Shares in Rentokil, which have lagged the U.K. support services sector by 10% over the last 12 months, were up 2.1% at 162 pence, valuing the group at around 2.9 billion pounds.
Rentokil Initial is being advised by Greenhill & Co. International.