Rentokil snaps up pest control firm

RentokilPest control company Rentokil Initial is hoping to blast the competition in North America after agreeing to buy US firm Western Exterminator for 99.6 million US dollars (£61.4 million).

Rentokil, which was founded in 1924 by Imperial College London professor Harold Maxwell-Lefroy, will become the third largest pest control firm in North America when the acquisition completes later this year.%VIRTUAL-SkimlinksPromo%
California-based Western Exterminator, which describes itself as a "family company not beholden to public stockholders", has 36 pest control offices in California, Arizona and Nevada, as well as a products division.

The acquisition is in line with Rentokil's strategy, outlined last November, to target pest control firms in North America, the world's largest pest control market, as well as in Latin America and the Middle East.

Western Exterminator, which was founded in 1921, reported underlying earnings of 4.1 million US dollars (£2.5 million) in the year to December 31 on revenues of around 149 million US dollars (£91.8 million).

Shares in Rentokil Initial, which also owns the City Link courier business, fell 1% as analysts warned Western Exterminator's profitability needed improvement.

Caroline de La Soujeole, industrial goods and services analyst at brokers Seymour Pierce, said: "We think the deal makes sense for Rentokil, increasing its footprint in the North American market but financially the acquisition will only prove viable if Rentokil management can significantly improve the profitability of the acquired business."

Rentokil said it will improve performance by using its management capabilities to bring Western Exterminator's operating margins in line with Rentokil's North American pest control business.

Western Exterminator is the third US acquisition this year after JCV Ehrlich and Presto-X.

Rentokil Initial chief executive Alan Brown said the deal would enable his company to "compete more effectively, particularly for customers looking for nationwide coverage in pest control".

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