Citi upgrades Rentokil on Terminix deal

Citi upgraded Rentokil Initial to ‘buy’ from ‘neutral’ on Thursday, arguing that the proposed acquisition of US rival Terminix could propel the company into the number 1 slot in US pest control.

It would have estimated market share of 25%, followed by Rollins with 20%, Ecolab with around 5% and Anticimex with 4-5%, Citi said.

"Based on State by State branch footprint analysis, we feel confident that Rentokil can significantly outperform management’s synergy target, possibly 2x," the bank said.

It has a 650p price target on Rentokil shares.

Rentokil announced in December that it had agreed to buy Terminix in a $6.7bn deal. It said the combination was expected "to create significant value, enhance long-term growth potential, be highly cash generative and present a compelling industrial logic".

At 1250 GMT, the shares were up 2.6% at 529.20p.