Shares of British pest control company Rentokil Initial PLC (GB:RTO) rallied almost 8% on news of a potential takeover offer led by the former CEO of BT Group PLC ($GB:BT.A), Philip Jansen. The news of a possible takeover was first reported by the Sunday Times over the weekend.
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More on Rentokil’s Possible Takeover
Jansen is reportedly holding discussions with private equity firms about a potential takeover of Rentokil Initial and a plan that would lead to his appointment as the executive chairman of the company.
The Sunday Times report added that if the deal goes through, Jansen and the private equity firms supporting the deal would use Rentokil to acquire and consolidate more pest control companies in the U.S., ultimately seeking a re-listing in New York.
Interestingly, last month there were reports that Nelson Peltz’s Trian Fund accumulated a notable stake in Rentokil Initial. The hedge fund has now emerged as the top 10 shareholders in Rentokil Initial and reportedly intends to hold talks with the company’s management about initiatives to enhance shareholder value.
Even after today’s rally, Rentokil Initial shares have still lost about 23% of their value in the past year. The stock took a major hit last October when the company warned investors about subdued demand in North America, its largest market. Rentokil Initial acquired Terminix Global Holdings in 2022 to strengthen its position in the North American region. However, the acquisition failed to deliver the desired results.
Is Rentokil Initial a Good Stock to Buy?
Rentokil Initial is scheduled to announce its first-half results on Thursday. RBC Capital analyst Andrew Brooks expects the company’s results to be in line with expectations. The analyst thinks that investors will pay attention to the organic revenue run-rate of the North American business. Brooks projects some acceleration in the North American business, driven by marketing investments and a rise in digital leads in April.
Analysts have a Moderate Buy consensus rating on Rentokil Initial stock based on three Buys and three Hold recommendations. The average RTO stock price target of 551.67p implies 13.6% upside potential.
