LONDON, UK: Rentokil Initial plc has entered into a definitive agreement to acquire Terminix Global Holdings for stock and cash.
The transaction will bring together two complementary businesses to create the global leader in pest control and hygiene & wellbeing, and the leader in the pest control business in North America, the world’s largest pest control market.
Under the terms of the agreement, Rentokil Initial will issue to Terminix shareholders at closing aggregate consideration comprised of approximately 643.29 million new Rentokil Initial shares (representing approximately 128.66 million American depository shares (“ADSs”), based on a 1:5 ADS to Rentokil Initial share ratio) and approximately $1.3bn in cash.
Based on Rentokil Initial’s 5-day average daily volume weighted share price and the 5-day average of the Sterling-US Dollar exchange rate both over the period spanning 6 to 10 December 2021 inclusive, this values the entire share capital of Terminix at $6.7billion, implying a value of $55.00 per share of Terminix common stock, and represents an aggregate consideration mix of 80% stock and 20% cash.
Terminix shareholders may elect to receive all cash or all stock consideration, subject to proration in the event of oversubscription. Each Terminix share for which no election or an invalid election is received will be deemed to have elected for all stock consideration.
The value of the per share cash election and the value of the per share stock election will be equalised ahead of closing such that the value of each election choice will be substantially the same.
The total number of new Rentokil Initial ADSs to be issued and the aggregate amount of cash to be paid under the terms of the Agreement will not vary as a result of individual election preferences.
As part of the combination, Rentokil Initial will list the American Depository Receipts (“ADRs”) evidencing the ADSs on the New York Stock Exchange (“NYSE”).
The combination will result in Terminix’s existing shareholders owning approximately 26% of the Combined Group on completion and sharing the benefits accruing to the Combined Group.
The transaction will combine two leading brands with a long cultural heritage, outstanding talent and strong focus on people, customers and ESG.
Upon completion, the Combined Group will have c.56,000 colleagues serving c.4.9m customers around the world from 790 locations.
The enlarged business will have a strong platform for growth, particularly in North America, and an attractive financial profile to support future growth, including through acquisitions and continued investment in innovation and technology.
For the year ended 31 December 2020, the Combined Group’s pro forma revenue would have amounted to US$5.7bn (£4.3bn), with EBITDA of US$1.2bn (£897m) and Free Cash Flow of US$608m (£458m).
The combination is expected to generate material annual pre-tax net cost synergies of at least US$150m (£113m) by the third full year post completion.
Run rate synergies are expected to accumulate c.30%, c.80% and 100% in the first, second and third 12-month periods respectively, post completion. In achieving these synergies, the Combined Group expects to incur aggregate cash implementation costs of approximately US$150m, half of which will be incurred in the first 12 months post completion. The Transaction is expected to deliver mid-teens percent accretion to Rentokil Initial’s earnings per share in the first full year post completion.
Andy Ransom, CEO of Rentokil Initial, said: “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 c.56,000 colleagues, protecting people, enhancing lives in over 87 countries, and serving c.4.9m customers.
“These are two highly complementary businesses with a similar operational playbook focused on supporting great people to provide outstanding customer service across Pest Control and Hygiene & Wellbeing.
The combination will deliver further investment and the sharing of best practices to enable our talented teams to better serve customers, protecting them from the growing threat of pests and meeting their future needs. We will open our first innovation centre in the US and provide our industry-leading innovations and digital technologies to a far larger customer base. This is a win-win-win for colleagues, customers and shareholders.”
Naren Gursahaney, Chairman of Terminix, said: “On behalf of the Board of Terminix, I enthusiastically support this complementary combination of two phenomenal pest management companies. Our Board of Directors is confident that Rentokil Initial is the perfect partner for Terminix and that this Transaction will maximize value for Terminix’s customers, teammates and stockholders.
The Transaction delivers a compelling 47.0% premium for Terminix’s stockholders, and the equity consideration will allow Terminix stockholders to participate in and benefit from the substantial upside potential of the combined company. The Terminix Board of Directors has unanimously determined that this highly complementary combination is a win for, and in the best interests of, all of our stakeholders. The combined company will be differentiated by its strong focus on people, customers and ESG and well-positioned to drive continued growth and value creation.”
Brett Ponton, CEO of Terminix, said: “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 organisation, we will offer superior service and an even more comprehensive range of solutions for our customers, while accelerating our investments in growth and technology. I look forward to the opportunity this combination provides for our colleagues and customers.
The shared cultural focus on providing our people with the training, tools, and technology necessary to provide world-class customer service will provide new opportunities for our teammates to develop as part of the worldwide leader in pest control. Leveraging our strong combined residential and commercial capabilities and enhanced customer density will bring us closer to our customers and improve the quality of service we provide to our customers.”
Founded in 1925, Rentokil Initial is a leader in the pest control and hygiene & wellbeing service industry. The Company has c.44,500 employees, and over 1,800 local service teams across the world covering around 90% of global GDP in over 90 of the world’s 100 largest cities across the US, Europe, UK, Asia, Pacific and Rest of World.
It operates in over 87 countries, with approximately 90% of its revenues derived outside the UK. The Company’s business model is focused on compounding revenue, profit and cash growth through a combination of organic growth and M&A.
Terminix Global Holdings (NYSE: TMX) is a leading provider of residential and commercial pest management. The Company provides pest management services and protection against termites, mosquitoes, rodents and other pests.
Headquartered in Memphis, Tenn., with more than 11,400 teammates and 2.9 million customers in 24 countries and territories, the Company visits more than 50,000 homes and businesses every day.
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