Rentokil to Buy J.C. Ehrlich for $141.8 Million

Rentokil Initial said on Tuesday it had agreed to buy U.S. pest control company J.C. Ehrlich Inc. for $141.8 million in cash to help strengthen its position in the North American market.

Ehrlich, which is based in Reading, Pa., has 1,200 employees, is the largest independently owned pest control company in the United States and the fourth largest U.S. pest control company overall, based on 2004 revenues, according to the 2005 PCT Top 100. It ranks behind only Terminix, Orkin and Ecolab.

About Rentokil

Information about Rentokil Pest Control’s U.S. operations, according to information the company submitted for the last year's PCT Top 100 List. International HQ: London U.S. Headquartuers: Norcross, Ga. Year founded: 1988 2004 Total Revenues (Jan. to Dec. 2004) $18.9 million Percent increase (from 2003) 4.6% Number of Offices: 16 Number of general pest control technicians: 150 Total number of employees: 250

"This transaction is a major development in our global pest control strategy and significantly improves our scale and opportunity in this attractive market," said Rentokil Chief Executive Doug Flynn.

In the year to the end of December, Ehrlich had revenues of $124 million, with $108.2 million coming from its pest control operation. Ehrlich Spokesperson Lynn Gerlach told PCT the remaining $16 million was generated by the company's distribution arm, Ehrlich Distribution. The acquisition includes both the JC Ehrlich Co., Inc. and Ehrlich Distribution. The combined organization will model its future growth on Ehrlich's existing service and distribution businesses.

Ehrlich President Victor Hammel would take on the role of CEO of the combined pest control operations which will be based at Ehrlich's existing headquarters in Reading. Kevin Ward, current president of Rentokil Initial’s pest control operations in North America, will join the combined organization’s senior management team. Several new positions are expected to be created as a result of the agreement.

“We are excited about this new chapter in Ehrlich history,” said Victor Hammel. “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’ll consider how to meld the best practices from each organization so we can better serve our residential and commercial customers.”

Ehrlich Co-Owner Bobby Hammel, who will also remain with the company, said they chose to consider an offer from Rentokil Initial because “they respected the culture we’ve cultivated over the past 78 years and wanted us to continue doing business the way we always have. The future well-being of our coworkers is of the utmost importance to us, and we feel that this expanded organization will offer them many new opportunities.”

Pest Control is one of Rentokil Initial’s 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 company’s scale in the attractive North American market, where Rentokil’s existing operations have been growing strongly. Rentokil Initial’s North American pest control operations 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 companies’ strong customer service ethos and technological innovation.

The transaction is expected to complete before the end of the first quarter, Rentokil said.

Shares in Rentokil closed at 153-1/2 pence on Monday, valuing the business at around 2.78 billion pounds ($4.94 billion).

Additional Source: Reuters