TIDMRTO
RNS Number : 0212S
Rentokil Initial PLC
16 December 2016
JOINT VENTURE WITH HANIEL
Delivering Shareholder Value
Rentokil Initial plc (FTSE: RTO, "the Company") and Haniel &
Cie. Holding Company ("Haniel") have today entered into an
agreement to form a joint venture ("the JV"), creating a leading
provider of Workwear and Hygiene services in Europe with combined
revenues of c. EUR1.1bn and APBITA of c. EUR130m (12 months to 30
June 2016).
The joint venture brings together Rentokil Initial's Workwear
and Hygiene businesses ("the Rentokil Initial businesses") in 10
countries principally in the Benelux and Central & Eastern
Europe regions, together with Haniel's businesses in 17 countries
which operate under the CWS-boco brand.
Key points:
-- The joint venture will be formed through the transfer of the Rentokil Initial businesses into CWS-boco, a company
owned by Haniel.
-- The valuation of Rentokil Initial's businesses transferring into the JV reflects good value at a multiple of 15.2
times APBITA (12 months to 30 June 2016).
-- In consideration for the transfer, Rentokil Initial will receive around EUR520m in cash and a c. 18% stake in the
joint venture, subject to working capital and other adjustments.
-- In relation to its investment in the JV, the Company will receive an annual fixed dividend of EUR19m for five
years.
-- The Rentokil Initial and CWS-boco businesses have complementary operations, products and capabilities providing
the potential for future growth, as well as synergies and efficiencies.
-- The transaction is a strong fit with the Company's capital allocation model:
o The cash received provides increased capacity for investment
in its core Pest Control and Hygiene categories in its Growth and
Emerging quadrants - with guidance for expenditure on bolt-on
acquisitions in 2017 now increased to GBP100m.
o Rentokil Initial also protects value in its Protect &
Enhance markets through an investment in a leading European
Workwear & Hygiene business.
-- Proceeds will be used to reduce net debt and provide increased flexibility for value-enhancing acquisitions in
Pest Control and Hygiene. The Company's pro forma Net Debt:EBITDA ratio (as at 30 June 2016) would be reduced
from 2.5x to c 2.0x and there would also be a pro forma reduction in annual interest costs of c. GBP7m.
-- Rentokil Initial anticipates maintaining its stake in the joint venture for a minimum period of three years, and
for an anticipated period of five years, after which the Company has various exit options under the agreement to
optimise further value for shareholders.
-- The transaction also provides the potential for a strategic alliance between Rentokil Initial's Pest Control
business and the joint venture, as well as for the development of Hygiene technology to support the joint venture
and Rentokil Initial's retained Hygiene operations.
-- In continental Europe the Company will retain its Pest Control, Plants, Specialist Hygiene, Premium Scenting,
Medical, Dental and other operations in the countries in which the Rentokil Initial businesses are transferring
to CWS-boco, as well as its Workwear and Hygiene businesses in France.
-- Completion of the transaction is subject to clearance from the competition authorities and will take place after
appropriate consultation with employees. The target for completion is mid-2017.
Andy Ransom, Chief Executive of Rentokil Initial, commented:
"We are delighted to announce this joint venture with Haniel, a
high-quality organisation with people who share our drive for value
creation, respect for colleagues and passion for customer service.
This is the right deal at the right time and the next step in the
implementation of our RIGHT WAY plan.
"Overall, I believe there is a compelling logic in bringing our
respective Workwear and Hygiene businesses together in these
European markets, freeing up capital to invest in our higher-growth
markets and delivering value for our shareholders.
"Our expectations for the full year ended 31 December 2016
remain unchanged."
Stephan Gemkow, Chief Executive of Haniel, commented:
"Our acquisition and the establishment of the joint venture will
further improve the future viability of our sustainable portfolio.
CWS-boco and Initial will have an excellent opportunity to continue
their current successful development in the attractive market for
workwear, cleanroom and hygiene services."
Focus on Growth and Emerging markets:
Rentokil Initial has been pursuing a strategy of growth in its
Pest Control and Hygiene businesses with particular focus on its
Growth and Emerging markets. Post completion the pro forma
percentage of the Company's revenues from these higher-growth
markets will rise to above 70%. Pest Control will account for
around 60% of revenues and over 60% of profits, and Hygiene will
account for around 20% of revenues and profits respectively.
Funds will be used to reduce net debt and provide increased
flexibility for value-enhancing acquisitions in Pest Control and
Hygiene, with guidance for expenditure on bolt-on acquisitions in
2017 now increased to GBP100m.
The Company's Workwear business in the transferring countries is
significantly integrated with Rentokil Initial's Hygiene operations
in those same countries. Elsewhere, Rentokil Initial's Hygiene
businesses typically operate alongside its Pest Control businesses.
Rentokil Initial remains fully committed to its global Hygiene
business (which operates in over 30 countries).
Other key aspects of the transaction:
-- The Company expects a run-rate reduction in its central and regional overheads as a result of the transaction of
c. GBP5m by the end of 2017.
-- One-off costs for Rentokil Initial (including transaction costs) are estimated to be in the region of GBP20m.
-- Rentokil Initial's 10 businesses being deployed into the joint venture delivered revenues of EUR328m and APBITA
of EUR53m (12 months to 30 June 2016 at 2015 CER).
-- The EUR520m cash to be received by Rentokil Initial will be funded through debt raised by the joint venture.
This debt will initially be provided to the joint venture by Haniel at market based interest rates.
-- The net impact of the sale is expected to be slightly dilutive on Adjusted EPS in the first year after completion
of c. 0.4p. Taking into account the fixed dividend, the pro forma impact on free cash flow (excluding one-offs)
in the 12 months after completion is an estimated reduction of c. GBP10m.
-- On a pro forma basis the transaction is expected to improve Rentokil Initial's underlying organic revenue growth,
profit growth and adjusted PBTA margins.
-- The estimated profit on transfer of the Rentokil Initial businesses into the joint venture is c. EUR540m based on
net assets of approximately EUR265m.
-- As part of the transaction the Company has the option to purchase Haniel's Hygiene businesses in Italy and
Ireland (which generated revenues of around EUR50m for the year ended December 2015).
This announcement contains inside information and the person
responsible for making this announcement is Daragh Fagan, Group
General Counsel and Company Secretary.
-ends-
Enquiries:
Rentokil
Investors Katharine Initial
/ Analysts: Rycroft plc 07811 270734
Rentokil
Malcolm Initial
Media: Padley plc 07788 978 199
John Sunnucks Bell Pottinger 0203 772 2549
Conference call for investors and analysts
A conference call for investors and analysts will be held at
9.15am on Friday, 16 December 2016. A copy of the presentation that
will be used during the call can be accessed on the home page of
the Company's website, www.rentokil-initial.com.
Participant access telephone numbers:
UK: +44 (0)330 336 9105
France: +33 (0)1 76 77 22 74
Hong Kong: +852 6963 0854
USA: +1 719-325-2202
The conference ID for this call is 8882788
Notes to editors:
The Haniel Workwear and Hygiene businesses in the joint venture
include:
-- Belgium, Netherlands, Luxembourg, Germany, Austria,
Switzerland, Czech Republic, Slovakia, Poland, Sweden, Bulgaria,
Croatia, Hungary, Romania, Slovenia, Italy and Ireland.
The Rentokil Initial Workwear and Hygiene businesses in the
joint venture include:
-- Belgium, Netherlands, Luxembourg, Germany, Austria,
Switzerland, Czech Republic, Slovakia, Poland and Sweden.
The joint venture does not include:
-- Pest Control, Plants, Specialist Hygiene, Premium Scenting,
Medical, Dental and other operations in the above countries.
-- All businesses in France.
-- In Italy and Ireland, the Company retains all businesses and
has agreed an option to acquire Haniel's Hygiene businesses in
these countries.
-- All businesses outside of continental Europe.
Rentokil Initial plc
Rentokil Initial is one of the largest business services
companies in the world, operating in over 60 countries. The Company
offers route-based services including Pest Control, Hygiene and
Workwear through teams of local experts. For more information,
visit www.rentokil-initial.com.
Haniel & Cie. GmbH
Franz Haniel & Cie. GmbH is a German family equity company
which has been headquartered in Duisburg-Ruhrort since it was
founded in 1756. It is from there that the Holding Company, which
is wholly owned by the family, manages a diversified portfolio in
line with a long-term investment strategy as a value developer.
Haniel's portfolio currently includes four business divisions which
are independently responsible for their own operating business and
which hold a leading market position in their respective sectors:
BekaertDeslee, CWS-boco and ELG (wholly owned), TAKKT (majority
owned). In addition there is the METRO GROUP financial investment.
For more information, visit www.haniel.com.
CWS-boco
CWS-boco International GmbH is one of the leading international
providers of professional textile services and washroom hygiene
solutions. This includes the well-known CWS cotton towel, soap and
fragrance dispensers and dust control mats, as well as industrially
washable workwear and business wear, customer-specific corporate
fashion collections, protective clothing from boco.
All services are offered in a flexible rental service. The
CWS-boco Group achieved a turnover of EUR779 million in 2015. The
company has 17 subsidiaries in Europe and China and employs around
7,500 employees around the globe. CWS-boco is wholly owned by Franz
Haniel & Cie. GmbH. Further information can be found at:
www.cws-boco.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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