Shares of Terminix Global Holdings Inc (NYSE: TMX) are up nearly 30% on Tuesday after Rentokil Initial plc (LON: RTO) said it will buy the pest-control company for about $6.7 billion in cash and stock.
Rentokil valued Terminix at $55 a share
Rentokil is paying $55 per share to acquire Terminix that represents a 47% premium on where the stock closed on Monday. According to the British company, it will fund 20% of the deal in cash while the remaining will be carried out in stocks.
Upon completion of the transaction expected in the back half of 2022, 26% of the combined company will be under the ownership of Terminix shareholders.
Rentokil expects the two companies to generate at least $150 million together in annual pre-tax net cost synergies by late 2025. On top of complementary strengths and capabilities, the joint firm will have roughly 4.9 million customers. Rentokil shares are down about 12% on Tuesday.
Terminix shareholders to set the nature of the agreement
The acquisition will also see Rentokil list ADRs (American Depository Receipts) on the New York Stock Exchange. Terminix shareholders have the power to turn it into an all-cash or an all-stock deal. In the press release, Rentokil CEO Andy Ransom said:
The combination will create a global leader in commercial, residential and termite pest control. These are two highly complementary businesses with a similar operational playbook focused on supporting people to provide outstanding customer service across Pest Control and Hygiene & Wellbeing.
The Board of Directors at Terminix has unanimously approved the agreement. Rentokil is on an acquisition spree and has bought several other pest control companies recently, including Delta, Bain, Southern, and Blue Chip.
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