New Rentokil offer lifts bid costs to pounds 74m

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The Independent Online
Rentokil yesterday looked set to secure victory in its bid for rival business services BET after raising its offer to pounds 2.1bn. But it revealed that the increased terms would raise the advisory and other costs of its bid by pounds 17m to pounds 74m.

The figure is before any payoffs for directors, with John Clark, BET's chief executive expected to pick up around pounds 5.6m if he is forced out following a successful takeover.

The news came as Amec, which successfully fended off an unwanted bid from the Norwegian group Kvaerner, announced that its pounds 4.1m defence costs had cut 1995 profits by over a fifth.

Clive Thompson, Rentokil chief executive, said around pounds 30m of the pounds 57m cost of the original bid related to underwriting fees. The new offer would add around pounds 17m to the total, part of which would be success-related, he said.

BET immediately rejected the increased offer, which was widely expected. News of the higher terms sent the bidder's share price down 13p to 350p yesterday, while BET added 0.75p to 208.25p. Rentokil is offering nine new shares and pounds 10 in cash for every 20 BET shares and promising to pay 4p a share in dividends to BET shareholders. The share terms remain the same under the new offer, but the cash element is raised from pounds 8 to pounds 10.80 or 14p a share. It values BET shares at 211.5p after the fall in the Rentokil price yesterday, well clear of a raised cash alternative of 202.5p, up from 179.5p before.

Announcing the new offer, Mr Thompson renewed hostilities in what has already been an acrimonious bid saying that Rentokil would be complaining to the Takeover Panel about BET's "misleading" use of the two companies' share prices in rejecting the latest offer.

He also reopened his attack on the management of BET since Mr Clark took over in April 1991. He said Mr Clark was now in the fifth year of a three year turnaround programme. "The management team which did a sound job in turning round this business has failed, it's failed and it's failed again in its attempts to grow the business."

Mr Thompson said Rentokil would reap cost savings from merging businesses and closing the BET head office. The 124 people in that area cost pounds 24.6m in 1994-95 and some of those costs could be saved, but he refused to give any precise figures, saying he did not want to fall into the trap created for itself by Granada when it said during its bid for Forte that it would reap pounds 100m savings from merging the two businesses.

He said any redundancies would come from managerial and administrative personnel and "we are talking about tens or hundreds rather than thousands world-wide." There would be immediate cost savings to be made from merging similar businesses such as cleaning, facilities management, personnel and security in the UK.

There would also be longer-portunities to develop BET's Initial brand name alongside the existing Rentokil brand. They would keep "an open mind" on what to do with peripheral businesses, including plant services, conference centres and resort management.

But BET said it had "no hesitation" in rejecting the bid after a board meeting yesterday. It claimed that much of the increased offer was illusory, with some 30 per cent of the increase being paid for with money already promised to BET shareholders through its final dividend for this year.