RENTOKIL sold off the loss-making delivery firm City Link to Better Capital yesterday, allowing it to focus on integrating its new businesses overseas.
Chief executive Alan Brown told City A.M. he hopes the firm’s shares will lose their perceived “conglomerate discount” following the sale of City Link for a nominal £1. “Our priority now is to bed in the major acquisitions in the US, the Middle East and Turkey and in the hygiene and workwear business in Europe,” he added.
Brown said some trade buyers had shown an interest in City Link, but were put off by the need to integrate the firm into their other businesses – the same problem that Rentokil has faced since acquiring it in 2006 as part of its £210m purchase of Target Express. Rentokil bosses had previously described the firm as the “problem child” of the group.
When Better Capital made an offer, Brown decided to exit earlier than planned, having said last month that City Link was not yet ready to be sold.
Better, the private equity group led by Jon Moulton, is keeping the existing City Link management team, which was installed over the last 18 months as part of Rentokil’s turnaround plan.
The firm will invest £40m in the courier group, which yesterday reported an adjusted loss of £8.1m in the first quarter of the year, narrowed by a third on the same period last year.
Rentokil will book a £40m charge to write off the business. The sale came as Rentokil posted a 13 per cent fall in first quarter profits to £10.6m, hit by unfavourable exchange rates and reorganising costs.
ADVISERS CITY LINK SALE
GREENBERG, TRAURIG & MAHER
MACFARLANES, PWC AND KPMG
THE DEAL price was just £1, but Rentokil’s sale of City Link to Better Capital involved months of work and a number of advisory and legal firms.
Rentokil took advice from KPMG, the professional services giant that also carries out the FTSE 250 group’s audit services. Leading the team were partner and head of European leisure Justin Zatouroff and associate director Stuart Sewell.
It also hired Greenberg, Traurig and Maher lawyers to provide legal advice. Paul Maher, partner and chairman of the firm’s London office, and associate Kate Eades led the team.
The firm’s London practice, set up by Maher in 2009, advised AstraZeneca on its $1.8bn (£1.17bn) AstraTech sale in 2011, and earlier this year helped Intercontinental Hotels sell its Park Lane hotel for more than £300m.
Advising Better Capital was PwC and corporate law firm Macfarlanes.
Rentokil executive director Andy Ransom is responsible for mergers and acquisitions at the firm, having previously led M&A deals for chemicals giant ICI. His involvement in the deal helped avoid the need for external banking advisers, said a person close to the transaction.