Rentokil given the green light on the Mitie acquisition

In a post on its website dated 22 August the Competition and Markets Authority (CMA) announced that it had accepted undertakings in lieu of reference for the completed acquisition by Rentokil Initial plc of MPCL Limited (formerly Mitie Pest Control Limited).

In plain English this announcement means that the acquisition of Mitie Pest Control Ltd (MPCL) by Rentokil Initialas announced on 1 October for £40m in cash, can now go ahead as it will not be referred for an in-depth Phase 2 investigation by the Competition and Markets Authourity (CMA). However, to achieve this Rentokil has had to agree to divest a large chunk of the business.

Rentokil Mitie Landscape


The initial fears that the acquisition of Mitie Pest Control Ltd might result in a substantial lessening of competition, particularly to national customers, within the UK market place, led Rentokil to offer (as announced on 30 April) to divest part of the business – known as the Divestment Business. This consisted of a number of contracts to provide pest control services to customers of MPCL in eigtht or more regions of the UK i.e. national customers acquired by Rentokil.

Assets including vans and employees, such as technicians and the national accounts team, would be divested as well as Rentokil providing such transitional services as a purchaser reasonably deems necessary to be an effective national competitor.

In the final undertakings document posted on 22 August, Rentokil has to ensure suitable transitional arrangements with the proposed purchaser of the Divestment Business to take place within a period not exceeding 38 business days (15 October 2019) from the date these undertakings take effect.

The 11 July 2019 posting on the CMA website revealed that Rentokil had offered to enter into an agreement for the sale of this Divestment Business to ServiceMaster Global Holdings Inc. Based in Tennessee, USA, this company is very well known in the global professional pest control market under its Terminix brand.

Terminix


So watch out, Terminix vans will soon, once again, be spotted on the UK high street. Terminix used to have a presence in the UK until the business was sold to Ecolab in 2012.

A further twist in this tale, also revealed in the posting on 11 July, was that ServiceMaster already has a presence in the UK and Irish markets as the company had recently purchased Pest Pulse, a technology-based pest control company based in Dublin.

Also that Peter Trotman, former managing director of Mitie Pest Control happens to be the UK managing director for Pest Pulse. Life goes full circle!

Preferred Supply Agreement excluded
The above excludes the Preferred Supply Agreement (PSA) entered into by Rentokil and Mitie in September 2018. A further undertaking announced in the final undertakings document is for the key terms of the PSA to be amended to limit its duration to three years and to make it non-exclusive, enabling Mitie to select additional and different suppliers for each end-customer without restrictions.

Not a totally smooth ride
On 14 August the CMA published a notice (dated 7 August 2019) of a penalty imposed on Rentokil Initial plc under section 110 of the Enterprise Act 2002. The CMA imposed the penalty for a failure to comply, without reasonable excuse, with the requirements imposed on Rentokil Initial plc by notices issued by the CMA.

A fixed penalty fine of £27,000 was issued.



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