BET turns up heat in bid battle

BET, the business services group, yesterday played down weekend press speculation that it will employ a "Forte-style" defence strategy against Rentokil's hostile pounds 1.8bn bid by embarking on a massive sell- off programme.

While sales are one option, BET will seek to turn up the heat in the bid battle by stressing chief executive John Clark's success in raising growth. "There seems to be a lot of Forte-itis around the place. But there will be no mad scramble to sell things off," said one source.

Prospects of an amicable settlement between the two sides receded as the war of words escalated over the weekend. Rentokil yesterday insisted: "The ball is in BET's court - it should come up with a more formal response to our proposals than it did on Friday."

A BET spokesman retorted last night: "The ball's in Rentokil's court - they made the hostile bid."

The BET man added that Rentokil's comments last week indicated it was going to become a highly personal battle: "John Clark is no patsy. Since he arrived in 1991 he has slimmed down the company. There is a real growth story there."

Speculation has been running high that BET's Clark would follow the Forte response to a hostile bid by launching a pounds 300m sell-off coupled with a special dividend to shareholders.

Sources close to the beleaguered company stressed, however, that "we've got a lot more irons in the fire. These could include acquiring or selling, people coming in from outside - a white knight. These are early days and nothing has been set yet."

At the same time, Rentokil moved quickly yesterday to squash accusations that it was planning "thousands" of job cuts at BET in the event of victory. "We clearly don't intend to make a large number of redundancies. There may be a small number at BET's head office. There also may be cuts in the management in the businesses which have not performed," said a Rentokil spokesman.

The Rentokil spokesman also suggested that reports of a Forte-style sell- off showed that BET was "just trying to talk up the price". Press reports suggested BET may be planning to sell off its cleaning, personnel, and catering businesses, in order to reinvest the money in higher margin, growth areas.

Scepticism in the City at the merits of the deal was growing at the weekend, with many brokers expecting Rentokil to lose its premium rating if the bid succeeds. City analysts pointed to Tomkins underperformance after swallowing baker RHM in a bid seen as a deal too far, or Hanson, which suffered after buying lower quality earnings, culminating in its takeover of Eastern Electricity.

"Rentokil is a high margin, high quality business, but BET's type of cleaning operation is not. Mrs Mop is not your sexy kind of business," said Societie Generale Strauss Turnbull analyst Zafar Khan.

"The entire group will have to be derated. Mr Thompson may have done the big deal, but what does he do for an encore? Where does he go from here?"

Brokers also said doubts about the 70 per cent overlap claimed by Rentokil go far wider than distribution, where Rentokil's City Link and A-Z Couriers parcel deliveries bear no relation to BET's heavy petrol, chemical and bulk tanker activities.

Initial textiles, a brand Rentokil wants to roll out internationally, has large factories as well as the familiar washroom and work clothing services.

BET's huge scope is also seen as a threat to Rentokil's successful culture, and its activities as less amenable to Rentokil's go-getting style.

"I'm a big fan of Rentokil's management but their structure - 600 branches with 600 managers, everyone runs their own business - you can't put that into BET," said NatWest Markets analyst Paul Morland.

NatWest and James Capel were just two brokers to put out strong sell recommendations on Rentokil on Friday.

The Takeover Panel meanwhile is looking further at why Rentokil left its first announcement until midday on Thursday, after rumours started the rounds on Tuesday afternoon following one of the biggest leaks in recent bids.

Just 205,000 BET shares were traded last Monday. The volume rose to 5.4 million on Tuesday, followed by 28 million, 48 million and 81.3 million in the next three days as the market went into a frenzy.

BET shares leapt 10.5p to 150p on Wednesday, while Rentokil's - unchanged the day before - shed 4.5p to 362.5p. Both started motoring in opposite directions the next morning.

Takeover Panel spokesman Peter Lee said, "We were instrumental in getting them to make an announcement. We are also concerned an announcement wasn't made earlier and that's something we're still looking at.

"It looks like there was a fairly major leak."