Not a week after the release on 23 February of the companys preliminary results for the year ended 31 December 2016, Rentokil announced what must be one of its largest manoeuvres, a joint venture with PCI Pest Control Pvt. Ltd in India. Rentokil states that this combined business will be the largest provider of pest control services and products in India.
Rentokil is to acquire a 57% stake in the new joint venture, for an undisclosed sum. As part of the transaction, the company will merge its Indian business into the joint venture. The combined business will be the largest provider of pest control services and products in India.
In the Rentokil press statement released on 28 February, tellingly, it states: “The company will have management control of the joint venture, which will have combined annual revenues of 4.5Bn rupees (c. £50m), operate from c.250 locations and employ c.6,900 people. In the 12 months to 31 March 2016, PCI delivered revenues of 3.7Bn rupees (c. £41m).”
|This agreement should come as no surprise as Andy Ransom, Rentokil CEO, who was obviously very aware of this impending announcement, said when he revealed their strong preliminary results: “Cash proceeds will be reinvested in pest control and hygiene and we intend to increase our spend on mergers and acquisitions in 2017 to at least £150m as we continue to identify a particularly strong pipeline of value-enhancing opportunities.” He also picked out the company’s interest in emerging and growth markets.
In 2016 Rentokil acquired no less than 41 companies with combined revenues of £124m. Amongst these being Cannon Pest Control in the UK.
Commenting on this joint venture announcement Andy Ransom said: “PCI is an outstanding business and by combining its national scale in India with our global expertise, we will create a market leader that is strongly positioned to take advantage of the increasing demand for commercial and residential pest control services over the coming years. Both companies operate similar business models with a strong commitment to colleagues and delivering great customer service.
“The growth potential in India is enormous. Economic activity, urbanisation, population growth and increasing urban middle classes are some of the key drivers of growth for pest control services, and we see these trends very clearly in India.”
CEO, Andy Ransom
|PCI is a privately owned company, provides a national presence in the Indian market – operating in 47 cities. Headquartered in Mumbai in Western India, it also has significant scale in north and east India. Mumbai is India’s commercial centre with one of the highest GDPs in the country and ranks as one of the world’s most populous cities (the metropolitan population is in excess of 20m). Rentokil has a strong presence in southern India where there will be significant density benefits by combining the businesses.
Maybe Rentokil was a purchaser of one of the mariad of market research surveys discussed in the article Researching the researchers in the most recent edition of Pest issue 49: February & March 2017.
The one common thread which emerged from these reports, was a prediction of a compound annual growth rate for the global pest control servicing market of over 5%.
The rising middle class population in developing countries will have an ever growing demand for pest control services because of rising focus on maintaining hygiene. Asia Pacific is set to grow the fastest mainly driven by the emerging countries such as India and China where stricter measures for eradication of deadly pests is anticipated to drive the pest control services market.