Rentokil in talks to sell office maintenance business

Rentokil Initial is in talks to sell its office maintenance division, according to reports from the Financial Times.

Discussions are under way regarding the plan, which would see US private equity firm Clayton Dubilier & Rice buy the division and merge it with its rival Balfour Beatty's similar operation. This would involve a second purchase of the Balfour Beatty division, which is valued at around £200 million.

A valuation of £400 million has been put on the Rentokil office maintenance business and the markets appear to have responded well to the potential sale with Rentokil Initial rising nearly three per cent following the reports.

Hector Forsythe at Oriel Securities spoke to the Guardian about the business sale, suggesting that there could be some tactics at play and further negotiations to come: "The proposal to a sale of the two businesses to a single purchaser reduces the probability that a deal can be done. That an article appears in the public domain at this juncture perhaps is an effort to get some price tension into the deal."

He added: "An exit would remove another non-core business from the Rentokil portfolio and lower group leverage, giving additional flexibility to maintain bolt-on growth in its core activities."

The news comes as the facilities management industry is working towards consolidation as customers are looking to receive a wider range of services from fewer suppliers; potentially good market conditions for a merger of Balfour Beatty and Rentokil's services.

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