Rentokil Initial PLC (LSE:RTO) has taken a major step to strengthen its pest control business with the acquisition of US peer Terminix for US$6.7bn in shares and cash.
The deal will make Rentokil the leader in the US pest control in both the US and rest of the world, it said in a statement, with a combined turnover in 2020 of US$5.7bn (£4.3bn) and underlying profits [EBITDA] of US$1.2bn (£897m).
Andy Ranson, Rentokil's chief executive said: " This is a win-win-win for colleagues, customers and shareholders."
Rentokil is offering a price 47% higher than the Terminix market close last night with US$1.3bn of the consideration paid in cash.
Terminix shareholders will end up owning approximately 26% of the combined group, which, on completion, will supply 4.9mln customers around the world from 790 locations.
Rentokil said the potential for growth in the US is one of the drivers of the deal alongside increased scale and leadership in the global pest control market.
Savings from the merger are expected to amount to at least US$150mln (£113mln) annually by the third full year post-completion at a cost of US$150mln in restructuring charges.
Going forward, the deal is expected to increase earnings by a mid-teens percentage in the first year full year.
Ransom added: "This is an exciting and transformational combination that will create the global leader in commercial, residential and termite pest control.
"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.
“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."