No way is Rentokil Initial supposed to work like this. Isn’t it the rats that are meant to end up in the trap — not the chief executive? Yet that’s where Andy Ransom looks to have wound up: the result of his $6.7 billion acquisition of Terminix, a big beast of the US pest control market.
Served up just before Christmas 2021, he declared his mega buy “transformational”. And, sadly, as with other UK corporate attempts to crack America, so it’s proving: so transformational, in fact, that a pre-deal Rentokil share price of 654p now stands at 380p, down another 20 per cent on the latest profits warning from Terminix land. Worse, it’s not clear he’s yet found a way to get his pest of a deal under control.
Terminix was always a risk. Since taking charge in October 2013, with the shares at about 110p, Ransom had proved himself a whizz at rolling-up hundreds of bolt-on buys. But the pest pulveriser from Memphis, Tennessee, more into termites than rodents, was in a different league. Up until then, his biggest buy had been the $425 million purchase of US outfit Steritech in 2015. On top, buying Terminix didn’t just involve $1.3 billion in cash but a slug of 643 million new shares.
• Rentokil feels bite of US uncertainty
On the day of the deal. Ransom admitted “all big transactions come with a level of integration risk”. But after the latest blooper not only is that “taking us longer than we expected”, he says, but trading is lagging competitors, not least rival Rollins. Ransom sounded rattled, too, as well he might, particularly with the activist investor Nelson Peltz having taken a stake in June and private equity said to be circling for a group, now valued at £9.6 billion, that’s no longer beyond their reach.
Ransom bought Terminix when it was midway through its own revamp, since when he’s found problems of both staff and customer retention. Rentokil has been investing in both. But its latest efforts have backfired. After gearing up for summer’s peak US pest control season, Ransom has found that the operation “was over-resourced in both sales and service” for the little organic sales growth coming through — now expected to be just 1 per cent in the second half versus a market growing, he says, at “4 to 5 per cent”.
The upshot? A £20 million sales miss plus £50 million of extra costs, not helped by a £10 million currency hit. Tot it up and Rentokil now expects £700 million of adjusted pre-tax profits this year — about 10 per cent below forecasts.
There’s a sense, too, that it’s come as a surprise to the US management — and, via them, to Ransom. It was only at the half-year results on July 25 that he told investors “we are now beginning to see encouraging early signs of operational and financial improvement”, thanks to the first four months of the “Right Way 2” plan to boost US marketing and sales leads, and hang on to staff and customers. Yet ask him to detail precisely what’s gone wrong apart from a sales and costs mismatch and he says: “That’s all I’ve got for you.”
• American dream starts to come true for Rentokil Initial
True, Ransom is delivering on the promised $325 million of deal synergies. And there is progress on integration, even if it’s yet to be seen whether he can keep workers and customers sweet when he’s closing 200 smaller branches and pushing sales through bigger sites.
Yet this is the third warning out of the US business. And while Ransom has proved himself a class act before, you can see why RBC analysts say that this is a “further hit to credibility”. Incidentally, ask him how he’s getting on with Peltz and all Ransom says is: “Nice try.” He needs to find a way smartish to spring his Terminix trap.
Easy pickings
Even Sir Stelios Haji-Ioannou can always get down to a new low. The proof of that? The attempt by the easyJet founder to do over a company that helps to fund charities: easyfundraising. Naturally, spotting the word “easy” in its name, the Monaco-based billionaire resorted to his usual easyBullying antics: taking it to the High Court with a ludicrous claim of trademark infringement, assailing it with vexatious demands for documents, forcing it to run up around £1 million of legal costs and then, in his familiar style, trashing the company, too.
He claimed it had built its business by pretending “they are a charity” and “have something to do with easyjet” — two false allegations, as he knew full well. Easyfundraising, around since 2005, runs a cashback model, where 8,000 brand partners donate a small percentage of spending on the site to charities and other good causes, such as grassroots sports or teaching bodies, so far raising more than £55 million.
Anyway, the good news. Having taken the company to court, Stelly lost. The judge, Mr Justice Fancourt, said his claim “necessarily fails”, given he found “no infringement” or “passing off”. He reasoned that no one “exercising a moderate degree of care” could confuse the yellow-logo’d site with his orange land of rag-bag brands (easyJet excepted) and that his nine witnesses provided nothing to suggest they could. Stelios didn’t even bother to give evidence. Nor did he have “an effective monopoly over ‘easy’ ”. He says he’ll appeal, in his customary attempt to drag cases out.
Isn’t there enough of a backlog in our courts without them being abused by a bullying billionaire?
Trump slump
A dog day for Donald Trump — and not just the ones that he bizarrely claimed immigrants were “eating” in Springfield, Ohio, despite a distinct lack of evidence. No, the market also got its fork into Trump Media & Technology Group, with the shares initially diving 17 per cent to a new low after the presidential debate. True, that may also reflect the end of the lock-up next week after which he can start selling his 60 per cent stake in a company now valued at $3.7 billion. But did investors also think his performance a bit of a dog’s dinner?