Rentokil seeks agreed pounds 1.8bn takeover of BET

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The Independent Online
RUSSELL HOTTEN

The Takeover Panel yesterday forced Rentokil to declare its plans for a possible pounds 1.8bn takeover of rival BET that would create one of the world's largest industrial services companies worth more than pounds 5bn.

As BET executives arrived back in London from America for an urgent board meeting today, the Stock Exchange was continuing inquiries into the rise in the company's share price on Wednesday.

BET's shares raced ahead with 28 million traded as rumours swept the market that Rentokil was about to pounce. One source said: "The buyers were coming from everywhere. There was obviously a big leak."

After intervention from the Takeover Panel, Rentokil made a short statement that it was interested in talking to BET about a recommended deal, that would probably involve a share swap.

However, it is understood that Rentokil is seriously considering a hostile move if necessary and launching a rights issue to fund a takeover that analysts believe may cost more than pounds 2bn. BET shares closed up 35p to 185p as investors anticipated that business services companies from abroad may be interested in bidding. One analyst though BET might be worth 200p a share. Rentokil, whose operations stretch from pest control to security, saw its shares fall 26p to 336p.

Rentokil has committed itself to earnings growth of 20 per cent a year, a target it is might not achieve in the future without a big acquisition.

Zafar Khan, analyst at Strauss Turnbull, thought BET would be a good fit if Rentokil achieved an agreed deal at the right.

"BET is a low-rated company, and Rentokil must feel it gives them fodder to work on to achieve its targets."

He was more cautious about a hostile bid, warning that Clive Thompson, chief executive, might be seen in the city as returning to the 1980s-style conglomerates that are out of favour. "A price of pounds 2bn would be just about earnings enhancing for Rentokil," Mr Khan said.

BET, which provides specialist support services in areas covering plant, distribution, business and textiles, has been turned around under chief executive John Clark. The company was on the "buy" list of a number of stockbrokers at the end of last year.

However, another analyst was less convinced, saying: "I can't find a great deal of industrial logic behind it." Also, BET net asset value is only about 33p, which means Rentokil would be paying a high price for goodwill. "These people businesses are very difficult to value," he said.

Rentokil is 52 per cent owned by Danish company Sophus Berendsen, described as a "sleeping parent" which wields little executive power in the UK's company's boardroom. Sophus has given its blessing to a deal, and is content to see its stake diluted.

Rentokil has acquired dozens of companies in the last few years, raising its global staff to more than 42,000 from 30,000.

BET said Mr Clark was in America reviewing its operations, and was expected back today for a board meeting. The company would give no indication of its initial reaction. Rentokil said it would be prepared to meet the BET at any time. Charles Grimaldi, director of corporate affairs, said: "We believe this would be a beneficial arrangment if we were to reach agreement on the recommended offer for BET."

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