Rentokil launches pounds 1.8bn hostile assault on BET

RUSSELL HOTTEN

The takeover bid for BET turned hostile yesterday, with the rival business services group Rentokil unveiling a pounds 1.8bn offer and launching a strong attack on the target's management.

BET, whose chief executive and finance director had flown back from America for an emergency board meeting, immediately rejected the offer as inadequate and grossly undervaluing the company.

As confusion continued as to why Rentokil's desire for an agreed deal quickly turned into a hostile move, some analysts predicted that the company's 190p-a-share offer was likely to succeed if raised slightly.

BET shares closed up 9p to 194p, suggesting that the City was expecting Rentokil to raise its terms.

Nigel Utley, analyst at Greig Middleton, said: "The City never expects the first bid to be the last. 190p is not a bad price, but they will have to go a bit further." Rentokil shares went down 3.5p to 329p.

The offer is nine new Rentokil shares and pounds 8 for every 20 BET shares, a 36.8 per cent premium to Wednesday's closing price. There is a cash alternative of 179.5 p.

The company also released profits figures that continue Rentokil's long record of annual growth above 20 per cent. Pre-tax profits to 31 December were pounds 214.5m, up 21.1 per cent, with earnings of 14.22p, up 21.1 per cent.

Clive Thompson, Rentokil's chief executive, said the acquisition would ensure that the company maintained its record. The deal would be earnings- enhancing in the first year, excluding rationalisation costs, which he said would "not be enormous".

He said the strategy for BET would be to focus on the cleaning, security, textile services and distribution businesses, with a possible sale of the plant services, conferences and resort management units. He described BET's financial performance as unfocused. "BET had some good businesses - but what about the management?" Mr Thompson asked. "They have to date demonstrably failed to enhance shareholder value, despite being given almost five years in which to do so."

Analysts said there was a fairly good fit between the two groups but, while Mr Thompson claimed 79 per cent of the BET businesses overlapped with Rentokil's, some analysts said they saw that figure nearer the 50 per cent mark.

BET's chief executive, John Clark, said he could now see the point in meeting the Rentokil board, which on Thursday was forced to rush out a statement that it was interested in talking about an agreed deal after a strong rise in BET's share price.

Mr Thompson claimed Rentokil received no response to its offer to meet from BET's chairman, Sir Christopher Harding, and so tabled its hostile bid.

Mr Clark said Rentokil was informed that he was on his way back from America, where he had been reviewing group operations, and would respond after a BET board meeting, held yesterday morning.

Sir Christopher added: "Only yesterday afternoon, I received a telephone call from Rentokil asking for a meeting to discuss a recommended offer. This morning's hurried announcement of a hostile and inadequate offer for BET reveals Rentokil's lack of confidence in being able to put forward a credible proposal."

Rentokil is 52 per cent owned by the Danish group Sophus Berendsen, described as a "sleeping partner", which takes little role in the day-to-day management of Rentokil business.

The company's chief executive, Hans Werdein, said it strongly supported the bid. "Furthermore, it is also our intention to remain a substantial long-term shareholder of Rentokil," he said.

Rentokil has acquired dozens of companies in the last few years, raising its global staff to more than 42,000 from 30,000, but has never tackled a takeover of anything like this size.

Comment, page 19

BET's performance

1991 1995 1991/95

Turnover (pounds m) 2,636 1,761 -33%

Profit before tax (pounds m) 181 122 -33%

Earnings per share (p) 14.9 10.4 -30%

Dividend per share (p) 13.25 4.0 -70%