CMA orders Rentokil to sell contracts to quell concerns over Cannon merger

The competition watchdog has ordered pest control and hygiene giant Rentokil Initial to sell several large supply contracts in order to quell concerns about its merger with rival Cannon Hygiene.

Following a probe, the Competition and Markets Authority (CMA) said the tie-up would result in “higher prices or a worse service for customers”.

Shares in Rentokil fell 1.1% on the news to 330.4p.

Rentokil and Cannon are two of the three biggest suppliers of washroom waste disposal services in the UK and the merger raised concerns about competition in the sector by reducing the choice of suppliers available to customers.

The CMA said the enlarged group would not be affected by competition from other suppliers and nor would future entrants to the sector have “sufficient impact in the foreseeable future”.

To assuage competition concerns, the CMA said Rentokil must sell contracts with national and multi-regional customers that were serviced by Cannon prior to the merger to a different company in order to “recreate the pre-existing competitive intensity for future national contracts”.

The buyer of the contracts would need to be approved by the CMA and would be allowed to acquire Cannon infrastructure such as vehicles and equipment.

Anne Lambert, inquiry chair of the CMA, said: “Our decision will preserve competition and choice for customers seeking a single supplier of washroom services across multiple locations.

“Where the CMA concludes that a merger will have a significant impact on competition, it will take action to restore that competition – regardless of whether a merger has been completed.”

Rentokil bought Cannon last January for an undisclosed sum and in April the CMA called in the merger for investigation.

Following an initial review of the merger, Rentokil offered no solutions to address the competition concerns and therefore the CMA referred the tie-up for an in-depth investigation last June.