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UPDATE 1-Rentokil forms venture with Germany's Haniel for workwear, hygiene units
December 16, 2016 / 8:32 AM / 9 months ago

UPDATE 1-Rentokil forms venture with Germany's Haniel for workwear, hygiene units

(Adds details, background, context)

Dec 16 (Reuters) - Britain’s Rentokil Initial Plc will combine parts of its workwear and hygiene units with those of Haniel, a family-owned German firm, to create a leading European provider with combined revenue of about 1.1 billion euros, the firms said.

Support services firm Rentokil said it would transfer its workwear and hygiene operations in 10 countries across the Benelux and Central and Eastern Europe regions to Haniel’s CWS-boco brand, which operates in 17 countries.

Rentokil, which also provides pest control services, said it would receive around 520 million euros ($543 million) in cash and a stake of about 18 percent in the joint venture.

The valuation of Rentokil’s businesses being transferred reflected a multiple of 15.2 times core earnings (Adjusted profit before tax, interest and amortisation or APBITA) over the year to June 30, the company said.

Rentokil has been focused on growing its pest control and hygiene businesses through international deals since restructuring its management and core businesses in 2013. Over the nine months to Sept. 30, Rentokil has bought 33 businesses with combined annual revenue of 109 million pounds.

With over 90 percent of its revenue now coming from outside the UK, Rentokil’s overseas expansion has shielded it against a slowdown in decision making by domestic customers since Britain’s vote to leave the EU, which has forced support services peers Capita and Mitie to issue warnings.

Rentokil expects the post-Brexit pound slide to boost its annual profits, even as its organic revenue growth accelerated over the third quarter partly due to improvements in its hygiene business and less challenging conditions in its workwear unit.

Rentokil said on Friday it would also receive an annual fixed dividend of 19 million euros from the joint venture for five years, adding that it would use deal proceeds to reduce debt and pursue acquisitions in its pest control and hygiene units.

The company raised its 2017 guidance for expenditure on bolt-on acquisitions to 100 million pounds.

Haniel, which holds investments in companies including German retailer Metro, said separately the deal would allow CWS-boco to continue its development in attractive markets for workwear, cleanroom and hygiene services.

Haniel said it expected the process of establishing the joint venture to be completed by the middle of 2017.

CWS-boco posted revenue of 393 million pounds for the six months ended June 30, accounting for about 22 percent of Haniel’s half-year revenue. ($1 = 0.9576 euros) (Reporting by Esha Vaish in Bengaluru; Editing by Sunil Nair and Gopakumar Warrier)

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