BET piles pressure on Rentokil's bid

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The Independent Online
The chances of Rentokil having to increase its pounds 1.9bn bid for rival business group BET rose yesterday as the target company's shares continued to edge ahead on the back of a profits forecast.

In its second defence document, BET said it expected a 28 per cent jump in pre-tax profits this year to not less than pounds 142m, a forecast that was slightly above City expectations.

The forecast, which included a 10 per cent rise in turnover to pounds 1.94bn, was described by BET as evidence that the company was being turned around.

Before the bid was launched on 16 February, stockbrokers UBS forecast profits of pounds 135m, while Greig Middleton had pencilled in pounds 138m. BET shares rose 3p to 203p yesterday, taking the price to more than 3 per cent above the value of Rentokil's cash and paper offer of 195p. However, Rentokil shares also rose 4p to 354p. Rentokil is offering nine new shares and 800p cash for every 20 BET shares, with a cash alternative of 179.5p.

John Clark, BET chief executive, said the forecast was "tangible proof that BET is delivering on its promises. These results demonstrate that BET has an exciting independent future and that Rentokil's offer is wholly inadequate."

Rentokil said it was surprised that BET had released a profits forecast so early in the bid timetable, leaving the company with almost nothing left in its armoury.

However, the timing may have something to do with Rentokil holding an extraordinary meeting yesterday, giving management little time to respond.

BET, which has already forecast a 27.5 per cent rise in this year's dividend to 5.1p, may be tempted to forecast one for next year.

Paul Morland, analyst at NatWest Markets, said the final profits figure would include a lot of provisions. He said the 10 per cent turnover rise meant BET's forecasts relied on larger margins than analysts had been expecting. "But it does not affect the way we see the bid," he said.

Another analyst said there was not enough detail in the defence document to check how the profits numbers had been arrived at, though he did not question the validity of the figures.

"We need to see what is going on in the major businesses," he said.

Clive Thompson, Rentokil's chief executive, said: "BET shareholders must surely be surprised that their board did not produce more. They must also question why their board has not provided them with the necessary detail to understand the forecast properly. If this is the best that the BET board can do, we continue to wonder why it does not recommend the offer."

Rentokil, which this week claimed 2.92 per cent of BET shares, reiterated its objective of providing 20 per cent profits and earnings growth if it acquires BET. The company's bid was approved at an extraordinary meeting yesterday.

Rentokil said its door was always open if BET wanted to talk about an agreed deal, but the company said it would not approach its target again. BET has twice publicly rebuffed Rentokil's attempt to get a recommended offer.