What do they see that everyone else has missed? First activist investor Nelson Peltz took a stake in UK pest-control business Rentokil Initial Plc, and now UK buyout veteran Philip Jansen has reportedly mulled taking the company private in what would be a jumbo deal. The London stock market is fertile territory for activists and private equity buyers. But, from the outside, the smart money’s interest here is puzzling.
A takeover could require paying an enterprise value of about £19 billion ($24 billion) after putting, say, a 40% premium on the undisturbed £11.3 billion market capitalization and taking on £3.2 billion of net debt. That would value Rentokil at 15 times this year’s expected profit as measured by earnings before interest, tax, depreciation and amortization.