More than a century ago, Harold Maxwell-Lefroy, a professor of entomology at Imperial College London, was tasked with exterminating the death watch beetles that burrowed into the structure of Westminster Hall and threatened to destroy the jewel of Parliament’s estate.
In 1924, a Hampshire-born scientist devised a formula to kill pesky insects – and as a result of his success, a business idea was born. He called his wood treatment Ento-Kill Fluid, derived from the Greek word for insect, entomon. However, when he went to register the company the following year, the name Entokill was rejected, so he added an “R” and Rentokil was born.
Maxwell-Lefroy later died from inhaling poisonous fumes while experimenting with houseflies but the company he created is now one of the world’s biggest pest killers, with a stock market value of £11.5 billion and operations spanning 80 countries.
Rentokil founder Harold Maxwell-Lefroy pioneered chemical control of insect pests, but succumbed to his own experiments with poisons.
WIKIPEDIA
But last week the royal rat, named after Buckingham Palace’s historic vermin control contract, was trying to deal with a different beast. Trian Partners, an activist investor led by the dreaded Nelson Peltz, has announced that it has taken a “significant” stake in the company and is now a top ten shareholder. Trian is understood to be agitating for major shake-ups at the company, including changes to its management and listing on the stock exchange.
Peltz’s arrival comes as Rentokil struggles with slowing growth in North America, where it generates 60 percent of its revenue. Last October, the company issued a profit warning due to falling demand in the US. Its growth in the first quarter also lagged behind its competitors.
Will Kirkness, an analyst at research firm Bernstein, said: “There is a lot of discussion about why growth is different from others in the industry and why Rentokil is underperforming.”
Since launching on the London market in 1969, Rentokil has faced its fair share of turbulence. Under Sir Clive Thompson, who took over in 1982, it embraced the heady zeitgeist of the 1980s and went on an acquisition spree, snapping up waste management, laundries and construction businesses. In the mid-2000s, it was even one of the largest suppliers of school dinners in the country.
It was the age of the conglomerate, and Rentokil was not alone: ​​Imperial Chemical Industries and Tomkins also grew fat through acquisitions. A personal friend of Margaret Thatcher, Thompson was dubbed “Mr 20%” due to the company’s rapid growth in revenue.
But the buying frenzy created an unfocused, unyielding beast that spent most of its time on low-margin activities. In the mid-2000s, Thompson was ousted and Rentokil failed to meet growth targets, published a profit warning and bungled its £210m purchase of package store Target Express.
Andy Ransom has turned Rentokil’s focus to its core business, but his US expansion plans are not yielding results
LUCY YOUNG FOR THE TIMES
The current boss, Andy Ransom, joined the scene in 2013 on the back of a new business focus on its higher-margin pest control business. He soon spun off Rentokil from security, clothing suppliers and catering to create a leaner company. Since his takeover, the share price has nearly tripled.
However, its plans to increase its American footprint have also encountered problems. In 2022, Rentokil announced the acquisition of rival Terminix for $6.7 billion, hoping to create a pest control behemoth with a 30% market share. That turned out to be tricky: in April, its first-quarter results showed North American revenue slowed to 1.5 percent, while its closest U.S. competitor, Rollins, posted about 8 percent growth. Smaller players such as Ecolab also outperformed Rentokil. Bernstein’s Kirkness said this created a valuation gap between the business and its competitors.
“The question is, is there a problem with Rentokil, a problem with Terminix, or is it just the difficulty of trying to bring two big businesses together?” he said. The company said in March that it expected business activity in North America to grow 2 percent to 4 percent this year, the market average.
These could be just the initial problems of the new acquisition. Duplication is inevitable in any takeover – in the case of Rentokil, right down to the routes its rats take when inspecting their clients’ properties. Currently, for example, the old Rentokil and Terminix routes are still operated separately, meaning inevitable overlap and inefficiency. Over the next six months, the company is trying to combine many of them so that workers do not have to repeat long journeys between meetings.
The company has a new growth plan in place that includes spending more on marketing so it can establish itself as a brand in the US. It also has a strategy of buying up small businesses that cater to customers on its exterminator routes, which will increase productivity.
Nelson Peltz, founder of Trian Fund Management, plans to capture value from Rentokil
CALLA KESSLER/BLOOMBERG/GETTY IMAGES
Then, in the midst of all the soul-searching, enters Peltz, who has battled some of the world’s biggest companies including Pepsi, Procter & Gamble and, most recently, Disney, failing to win board seats.
The hedge fund’s solutions to Rentokil are understood to be reminiscent of its failures at other UK companies such as consumer giant Unilever and plumbing firm Ferguson. Trian is set to meet with Rentokil executives as early as next week to discuss how the company can close the valuation gap with the competition. The fund is believed to be considering a number of proposals to boost the company’s share price, including re-listing the business in the US and redirecting its operations there, speeding up Ransom’s exit and spinning off some of its remaining pest control activities. portfolios.
One source also said Trian is expected to push Rentokil out of some underperforming countries, which could divert management’s attention away from the US market.
Trian, who is also believed to be considering pushing for more seats on the company’s board, declined to comment.
After a century of selling poison, Rentokil may now need Peltz to help him find an antidote.