It was announced today (1 October 2018) that the Mitie Group plc is to sell the entire issued share capital of Mitie Pest Control Limited to Rentokil Initial plc for a consideration of £40 million in cash on a debt free, cash free basis.
This sale of the pest control part of the Mitie business to Rentokil Initial comes as no surprise to those who follow the vagaries of such companies. It is well reported that Rentokil has a treasure chest of cash and the stated objective of expanding their pest control business by acquisition.
On the other hand Mitie announced a turn-around plan after poor results in March this year. This was followed in the same month by the departure of its previous long-term managing director, Peter Trotman, the son of the owner of Eagle Pest Control which formed the original core of the Mitie pest business.
This was followed by the subsequent appointment of Andy Halsall – a specialist in business transformations, including that of OCS which involved the sale of Cannon Pest Control in January 2017 – also to Rentokil. The scene was set.......
In their press release Mitie detailed the highlights relating to this sale as:
- Pest is a strong performing business, however the decision has been made to focus on developing our core businesses comprised within Mitie’s IFM offering.
- The pest business has been sold for a consideration of £40 million in cash. The majority of the proceeds from the sale will be used to strengthen our balance sheet and will be reinvested into our core businesses.
- Rentokil Initial will become Mitie’s preferred supplier of pest services, where such services are provided as part of an integrated facilities management offering to Mitie’s customers. Rentokil’s expertise will enhance the range of services that Mitie provides to its integrated facilities management customers.
- Where Mitie already offers pest control services to its customers (as part of an integrated facilities management service), there will be no change to services and the pest control element of those services will be provided by Rentokil Initial as the preferred supplier.
- Mitie currently already works with a number of preferred partners to deliver specialist services – this is another example of Mitie partnering with one of the UK’s leading providers, whilst ensuring service quality and innovation is maintained for customers.
Phil Bentley, chief executive officer, Mitie, commented: “Historically, Mitie has worked with preferred partners to deliver certain specialist services for our clients. By teaming up with Rentokil Initial - the UK’s largest provider of pest services - we free up funds to invest in our core businesses, whilst ensuring service quality and innovation is maintained for our clients.”
Mitie Pest’s interim managing director Andy Halsall will continue his role with the company for an interim period, to ensure a smooth transition of the business from Mitie to Rentokil and ensure continuity of service for Mitie’s customers.
The sale of Mitie Pest constitutes a Class 2 transaction for the purposes of the UK Financial Conduct Authority's Listing Rules.
Mitie Pest reported profits before tax of £2 million for the financial year ended 31 March 2018. Earnings before interest and tax, adjusted to exclude non-recurring items and the recharge of Mitie central service costs, were £3.2 million over the same period. At a balance sheet date of 31 March 2018, Mitie Pest had gross assets of £8.7 million. The company continues to grow and the forecast earnings before interest and tax, adjusted to exclude non-recurring items and the recharge of Mitie central service costs for the six months ended 30 September 2018 are expected to be £2.4 million.