Rentokil expands with £79m US pest control deal

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The support services company Rentokil has bought the number four US pest control business, in its biggest acquisition under new management.

The British company, which last year saw off a hostile takeover approach from Sir Gerry Robinson, will pay $141.8m (£79m) for JC Ehrlich.

Doug Flynn, who was brought in last year as Rentokil's chief executive following a boardroom coup, said: "This transaction is a major development in our global pest control strategy and significantly improves our scale and opportunity in this attractive market."

Pest control is one of the areas that Mr Flynn has said he will seek to grow partly by acquisition. Ehrlich, which is based in Reading, Pennsylvania, is the largest independently owned pest control company in the United States. It was established in 1928 by Julius C Ehrlich and had continued to be owned and managed by the descendants of the family for four generations. It operates 42 branches across seven eastern states.

Analysts at UBS said: "From a sentiment point of view however, it could be that the deal is seen by investors, given its size (biggest acquisition by Rentokil in a number of years), as evidence that the underlying Rentokil businesses are beginning to stabilise, and that the company is returning to a more expansionary mode."

Last year, Ehrlich had revenues of $124m. Its president Victor Hammel, an Ehrlich family member, will become head of the combined pest control operations. Before the deal, Rentokil Initial's existing US pest control business generated turnover of just $26m in 2005. It employed 300 people and trades from 16 branches in 8 states.