Free Trial

Rentokil (RTOLN; BBB/BBB S) Activist stake follow up

CONSUMER CYCLICALS

This is the response Bloomberg shared from Peltz's activist fund; “Trian confirms that it has a significant position in Rentokil and is currently a top 10 shareholder...Trian also confirms it has reached out to Rentokil to discuss ideas and initiatives to improve shareholder value.” (emailed).


History of stakes;
    • Current: Unilever; has had a board seat from '22 and backed the new CEO's plans (whose appointment had his support) for Ice-cream spin-off & job cuts.
    • 2023/24: Disney; recently disposed his stake after a unsuccessful bid for a board seat.
    • 2017-21: P&G; Took a stake, eventually won a board seat pushed for major splits but company did smaller restructuring.
    • 2015: DuPont De Nemours; Peltz wanted the chemical manufacturer into to two parts. Peltz failed.
    • 2014: Pepsi co; Peltz wanted it to split off its snack business, failed again.


  • No firm view on what impact Peltz will do noting above tilt to enhancing ROIC through splits. Rentokil acquired then rival, Terminix, in late '22 to extend its North American footprint ($6.7b using $1.34b cash + shares). IT ended FY24 with £4.7b of gross debt against £1.6b of cash & eqvs. With £1.2b of EBITDA it left it net 2.8x levered.
  • Re. business structure/what could be split; North America is now 62% of sales (up from 40% in 2019), Europe (ex. UK) 20%. Pest control is 80%, Hygiene & Wellbeing 16% and France workwear 4% - hard to differentiate much on margin, workwear looks tad weaker


Re. cash curve as we said we see better value in services on Pluxee (NR/BBB+) (28s a cheap view) and/or Securitas (NR/BBB). Curve is unch this morning, likely to be a slow burner situation. Key comp. Rollins is not a credit issuer. share px divergence between the two might explain why RTO is getting activist investor attention.


Some background in this WSJ write-up on Peltz and his Trian funds.

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.