From Morningstar: 2024-06-11 20:14:00

Shares in Rentokil (RTO) surged over 14% following activist investor Nelson Peltz’s large stake purchase to engage with Rentokil’s leadership on increasing shareholder value. Rentokil rose to £4.76 but still below Morningstar’s fair value estimate of £6.20. The news made Rentokil the top riser in the FTSE 100 with a market cap over £12 billion.

Although Rentokil has struggled recently, especially in the US, after a $6.7 billion deal to buy Terminix to boost market share was met with softer demand. Peltz’s involvement is expected to bring significant changes to the business, possibly including a shift in its primary listing to the US.

Investment director Russ Mould believes Peltz will instigate a major shake-up at Rentokil, aiming to improve its financial performance, often lagging behind US peer Rollins. Despite the stock price increase, Rentokil is still 26% lower than a year ago.

Senior equity analyst Grant Slade at Morningstar sees potential upside in Rentokil stock, with Peltz’s investment indicating overlooked long-term growth prospects. The stock trades at a 25% discount to the Fair Value Estimate, and Peltz’s engagement could unlock shareholder value, particularly in the North American pest control division.

Nelson Peltz, a renowned US billionaire, businessman, and hedge fund manager, has a record of leading aggressive business makeovers and M&A deals through Trian Partners. Peltz recently engaged in a proxy battle with Disney over underperformance and succession issues but eventually sold his stake after losing the battle.



Read more at Morningstar: Rentokil Shares Leap on Nelson Peltz Buy-in