Rumours of Rentokil bid boost BET

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The Independent Online
RUSSELL HOTTEN

Takeover fever boosted shares in BET, the business services group, after rumours swept the market that rival Rentokil was preparing a hostile bid of more than pounds 1bn.

Although analysts were cautious of the speculation, the prospect of a bid was sufficiently compelling for more than 24 million BET shares to be traded.

Both companies said they were aware of the speculation, but neither would comment further. BET shares rose 10.5p to 150p, while Rentokil was down 5p to 362p.

BET has been successfully turned around after management began severe cost-cutting at operations that looked unlikely to meet targets. The company was a share "buy" for several stockbrokers at the end of last year.

But analysts' doubts about a bid focused on BET's net asset value of about 33p, which would mean any bidder paying a huge price for the goodwill.

Although Nigel Utley, of Greig Middleton, thought an agreed deal could not be ruled out, he added: "Nothing is impossible, but some things are unlikely."

Rentokil, 52-per cent owned by the Danish company Sophus Berendsen, has publicly committed itself to annual earnings growth of 20 per cent a year.

There is little overlap between the two companies, except for cleaning and personnel services, and another analyst suggested that Rentokil may be planning to "acquire" growth to sustain its track record. But buying BET would probably mean a large rights issue that may significantly dilute Berendsen's holding.

Panmure Gordon analyst Charles Pick said Berendsen was a "sleeping parent", content to receive Rentokil's earnings and unlikely to sanction a rights issue for what could be a risky bid.

BET, with a market value of pounds 1.3bn, has been moving into more high margin business services since it came close to collapse, and last year paid pounds 70m for one of Britain's leading conference and training businesses, Style.

BET, whose strategy has emulated Rentokil's, has restructured the business to reduce the number of subsidiaries from more than 180 to under 60.

After years of retrenchment, BET's new management is starting to invest in its businesses and the company expected to make profits of pounds 130m this year, and about pounds 148m next.

Rentokil, with a market worth of pounds 3.6bn, long ago jettisoned its rat- catcher tag as it moved into more sophisticated business services. In 1993, the company paid pounds 75.7m for security group Securiguard, its largest acquisition.

Rentokil's growth record, with 14 years of earnings growth above 20 per cent, has been a stock market phenomenon.

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