Corporate development : Rentokil case

Résumé du document

This assignment has been undertaken in order to estimate if it is a good opportunity for Rentokil to make a bid for the British Electric Traction or BET. The last few years were very profitable for the two companies that have decided to merge or takeover. If we analyze the growth of the CAC 40, the benchmark of the French stock index, in 2006, we can conclude that there was a very high increase of the French stocks thanks to operations of mergers and acquisitions. More than 60% of the increase of the CAC 40 was the result of these development strategies. These companies have chosen to merge this year in part because of the low rate of the interests and consequently it allows them to grow and increase their profits considerably. The current movement of merger and acquisition is not a common trend in our economical environment. Indeed the two reasons exposed above have to be completed by the fact that a new actor comes to play in the markets. It will be interesting to note how the merger will have an impact on the stock markets and the general public.

Extraits

[...] It was the third more important segment. It was not enough present in Asia Pacific & Africa but had the best position in North America and in United Kingdom. Nevertheless, it was the second less profitable activity of the group. Other (Distribution (mail & services), Personal service, Maintenance (facilities & office machine)) These activities represented more than 10% of the turnover. They were very present in United Kingdom of the UK's activities). Effectiveness of the turnover of the other activities was generated in UK. [...]

[...] The logic of the stock has helped Rentokil to acquire B.E.T. Indeed the capital of the company was atomized between different and very little actors. On the contrary to Rentokil, nobody in the capital of B.E.T have enough power of the shares) in order to block a decision. In the case of this acquisition B.E.T had not many option to create poisons pills in order to avoid the acquisition. Companies during the past few years have released many stratagems in order to avoid acquisition. [...]

[...] It represents 28% of the profits of the company. Finally the last activity of B.E.T is the textile services, which “include the supply, rental and laundering of specialist healthcare linen, washroom products, industrial and other work wear, wiping cloths and mats, hotel and restaurant linen as wall as consumables, vending and dispensing equipment and hygiene systems”. These services are still services for companies. It can still be integrated in the range of the outsourcing possibility. Moreover this activity widens the possibility of Rentokil to offer new types of services, for example to widen its offer to the hospital. [...]

[...] In the same way, EPS rose from 6.9 p to 10.4 an increased of 51%. The dividends also grew with a 23% increase on the previous year. If we were focused on the turnover's results, the main activity of B.E.T Public Limited will be the Business services. Indeed, in 1995, the firm had a turnover of £785m. Furthermore, it is not the most profitable segment. The other three core businesses had a lower turnover than business services (twice less important) but they had more or less the same operating profit. [...]

[...] Concerning the management, it is totally different than Rentokil because it is segmented by core business. In other word, each core business has its own manager. The financial situation of BET: The turnover of BET was for 1994 about millions and for the year 1995. The increase of this turnover was about 12% between the both years. The operating profit increased from 99.0 to 118.8 between 1994 and 1995. The progression was about 19%. This operating profit represents for the year of the turnover. [...]