Rentokil Initial plc announces that it has entered into an agreement to acquire J.C. Ehrlich Co. Inc. ("Ehrlich") for a consideration of US$141.8 million (£80.1 million). Ehrlich is the largest independently-owned pest control company in the US and the fourth largest pest control company in the US overall. The transaction will be financed from available cash resources.
Pest Control is one of Rentokil Initialís main business drivers, along with Washrooms and Textiles, for the creation of sustainable, profitable growth. Rentokil Initial is already the European market leader in pest control and has strong market positions in Asia Pacific and South Africa. The proposed acquisition of Ehrlich will significantly increase the companyís scale in the attractive North American market, where Rentokilís existing operations have been growing strongly.
Ehrlich, based in Reading, Pennsylvania, was established in 1928 by Julius C. Ehrlich and has continued to be owned and managed by the descendants of the family for four generations. It operates 42 branches across seven Eastern states, providing a full range of pest control services to commercial and residential customers. In the year ended 31 December 2005, Ehrlich had revenues of US$124.0 million (£70.0 million).
Rentokil Initialís North American pest control operations, with revenues in 2005 of approximately US$26.0 million (£14.7 million), are currently focused on commercial customers in complementary geographic regions. The combined business will provide Rentokil Initial with a platform for further growth, building on both companiesí strong customer service ethos and technological innovation.
Victor Hammel, currently President of Ehrlich, will assume the role of CEO of the combined pest control operations which will be based at Ehrlichís existing headquarters in Reading, Pennsylvania. Kevin Ward, current President of Rentokilís pest control operations in North America, will join the combined organisationís senior management team.
The agreement is subject to customary closing conditions including confirmation of the financial results of Ehrlich for the year ending 31 December 2005 and on the expiry of the waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976. Completion of the acquisition is expected before the end of the first quarter.
Doug Flynn, Chief Executive of Rentokil Initial, said:
"We are delighted to announce the proposed acquisition of Ehrlich which has an excellent reputation and a strong market position in the growing US pest control industry. This transaction is a major development in our global pest control strategy and significantly improves our scale and opportunity in this attractive market.
Ehrlich brings us a substantial business with a strong customer service culture. Both Ehrlich and our own US businesses are well managed and have shown solid growth over the last few years. When combined they will create a strong platform from which to develop an expanded position in the US pest control market." Victor Hammel, current President of Ehrlich and CEO designate for the combined pest control operation, said:
"Our relationship with Rentokil Initial will be beneficial for both companies. Rentokil Initial has a reputation for quality that is very similar to ours and we believe there is a great deal we can learn from each other. Over the next few months, we will consider how to meld the best practices from each organization so we can better serve our residential and commercial customers."
Co-owner of Ehrlich, Bobby Hammel said:
"We chose Rentokil Initial because they respected the culture we have cultivated over the past 78 years. The future well-being of our co-workers is of the utmost importance to us, and we feel that this expanded organization will offer them many new opportunities."