Trian Partners Acquires ’Significant‘ Stake in Rentokil Initial

***Updated on 6/17 at 9:15 a.m.****

As reported by numerous news outlets, activist investor Nelson Peltz's Trian Fund Management has acquired a “significant claim” in Rentokil Initial. 

Trian is now one of Rentokil's 10 largest shareholders, a Trian spokesperson emailed Bloomberg.

The Wall Street Journal reported that Trian reached out to Rentokil Initial to discuss "ideas and initiatives to improve shareholder value."

Paul Giannamore, managing director of Potomac Company, told PCT it is common for activist investors to become immediately involved. “Usually what activist investors do is go in and find assets that they think either the market is undervaluing and the subject company is not communicating effectively with the market, or they try to make some moves that will 'unlock value,'" he said.

Giannamore believes it's very likely that Trian Partners will push for a seat on the Rentokil Board of Directors where they can more directly communicate with Rentokil Initial shareholders and influence change.

Just what changes might occur remains to be seen. PCT reached out to Rentokil Initial officials, and they responded via email that the company is "not commenting at this early stage."

In an emailed report, investment bank and financial services firm William Blair noted that "Rentokil shareholders were surprised by the anemic organic growth in North America, as Terminix was folded into the organic revenue base after lapping the 12-month acquisition date." 

According to CNBC, Rentokil Initial shares have fallen by more than a third in the last year, as the company grappled with a softening consumer. CNBC also reported that Rentokil Initial shares surged round 8% after hours on the news. It had a market capitalization of $13.3 billion at Tuesday’s close, prior to the spike.

The William Blair report also noted it will “not be surprised to see Trian push for a U.S. listing, given the discount that Rentokil carries relative to similar U.S.-based, high-quality commercial services companies with high recurring revenue and cash flow characteristics; this is similar to what occurred with Ferguson Plc (FERG $208.68;Outperform) several years ago.”

Giannamore also said he thinks it’s possible Trian will push for a U.S. listing. “A lot of these businesses are valued on comparables. When you look at British companies on the London Stock Exchange, Rentokil is valued against its peers in London, whereas its main peer is really Rollins, which is over here on the New York Stock Exchange,” Giannamore said. “So you move it to New York and now Rollins is that fear that could potentially drive an increase in share price.”

Peltz’s move comes just a few weeks after Trian disposed of its remaining stake in the Walt Disney Company, after it made an unsuccessful run for board representation.