Terminix to Merge With Rentokil to Create Global Pest Control Leader

Source: Streetwise Reports   12/14/2021

Terminix Global Holdings Inc. shares traded 18% higher after the company reported it has entered into a definitive agreement to be acquired by Rentokil Initial Plc. in a cash and stock transaction valued at US$6.7 billion, or about US$55/share.

Leading U.S. residential and commercial pest management services company Terminix Global Holdings Inc. (TMX:NYSE) today announced that it has entered into a definitive agreement to be acquired by United Kingdom-based Rentokil Initial Plc. (RTO:LSE) in a transaction valued at approximately US$6.7 billion.

The report listed that combining the two firms’ operations will serve to create a global leader in pest management across both residential and commercial services bringing together Terminix’s leading position in residential and commercial pest management services in United States and Rentokil Initial’s strong international operations and global commercial pest control offerings.

Under the terms of the agreement, through a somewhat complicated issuance of new shares by Rentokil Initial and subsequent listing of American Depository Shares (ADS) on the NYSE, the total consideration payable to existing Terminix shareholders will be US$6.7billion, which implies a price of approximately US$55 per share for each Terminix common stock share owned. Current Terminix shareholders will receive a mix of 80% stock and 20% cash in aggregate consideration. Terminix shareholders may elect to receive all cash or all stock consideration, subject to proration in the event of oversubscription.

“This is an exciting and transformational combination that will create the global leader in commercial, residential and termite pest control.”

—Rentokil Initial Chief Executive Officer Andy Ransom

The firms indicated that the $55 offering price represents a 47% premium over Terminix’s closing share price on Dec. 13, 2021.

The companies see large opportunities for synergistic and profitable growth, particularly in North America. After the transaction is completed, the combined company will have 56,000 employees serving over 4.9 million customers in 790 global locations.

The report advised that each company’s Boards of Directors have already unanimously approved the merger transaction and recommend that their respective shareholders vote in favor of it. The transaction is expected to close in H2/22, subject to approval by both Rentokil Initial and Terminix shareholders, ordinary closing conditions, share listing approvals by the New York and London stock exchanges and various regulatory approvals.

When the transaction is completed, existing Terminix’s shareholders will own approximately 26% of the combined group with Rentokil Initial shareholders owning the remaining 74%.

Terminix’s Chief Executive Officer Brett Ponton commented, “This is an exciting next step that significantly advances Terminix’s journey toward becoming a global leader in pest management. As part of a larger and stronger organization, we will offer superior service and an even more comprehensive range of solutions for our customers, while accelerating our investments in growth and technology. Leveraging our strong combined residential and commercial capabilities and enhanced customer density will improve the quality of service we provide long into the future.”

“The Board of Rentokil Initial and I are delighted to recommend this transformational combination which will create the global leader in pest control and hygiene and well being. Under Andy Ransom’s leadership, our combined group will have a highly talented and experienced management team able to more effectively create value and enhance long-term growth,” Rentokil Initial’s Chairman Richard Solomons commented on today’s announcement.

Rentokil’s Chief Executive Officer Andy Ransom added, “This is an exciting and transformational combination that will create the global leader in commercial, residential and termite pest control, and a leader in North America, the world’s largest pest control market. It brings together [about] 56,000 colleagues, protecting people, enhancing lives in over 87 countries, and serving [about] 4.9 million customers.”

When the acquisition is completed, Solomons and Ransom will continue to hold their positions in the combined group which will be incorporated, headquartered and domiciled in the U.K.

Rentokil Initial provides services to the pest control and hygiene and wellbeing service industry. The company presently has about 44,500 employees and 1,800 local service teams throughout the world in 90 of the world’s 100 largest cities. Though it is based in the U.K., it derived around 90% of its revenues internationally.

Terminix is a leading U.S. provider of residential and commercial pest management services headquartered in Memphis, Tenn. The firm’s staff visit more than 50,000 residences and businesses every day. The company has around 2.9 million customers in 24 countries and territories that are served by its 11,000-plus teammates. The firm earns most (95%) of its revenues in the U.S.

Terminix started the day with a market cap of around $4.5 billion with approximately 121.1 million shares outstanding and a short interest of about 1.1%. TMX shares opened 28% higher today at $47.90 (+$10.49, +28.04%) over yesterday’s $37.41 closing price. The stock has traded today between $43.45 and 48.69 per share and is currently trading at $43.98 (+$6.57, +17.56%).

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