By Dhirendra Tripathi
Investing.com – Rentokil stock (LON:RTO) traded 5% lower in London trading Tuesday after the company announced the $6.7-billion acquisition of U.S.-based peer Terminix (NYSE:TMX).
The U.K. group will pay $1.3 billion in cash and will issue 643.29 million new shares to cover the balance. Terminix's shareholders will own about 26% of the enlarged group.
The price paid represents a 47% premium to Monday's close of $37.41 for Terminix stock, but Rentokil expects the deal to generate cost savings of at least $150 million by the third year after the close and add to earnings per share within a year of closure.
Terminix generated pest control revenue of around $2 billion for the year to December 31, 2020. Shares of the U.S. company were yet to trade in premarket.
.The deal gives the U.K. firm greater access to the termite and pest control market in North America. Pest control is a largely non-discretionary and essential service, accentuated in a post-Covid world.
The combined entity will serve about 4.9 million customers around the world from 790 locations and employ about 56,000 people, the companies said.
The deal is expected to close in the second half of 2022.
ADRs of the combined group will be listed on the New York Stock Exchange, Rentokil said.