Why Pest Control Giant Rentokil's Shares Are Shooting Higher Today

Zinger Key Points
  • Trian becomes top 10 shareholder in Rentokil.
  • Stake increase boosts Rentokil's valuation to $15 billion.

Pest control company Rentokil Initial Plc RTO shares are trading higher after activist investor Nelson Peltz’s Trian Fund Management LP has reportedly increased its stake, making it one of the top ten shareholders of the U.K.-based company.

This move has notably revived Rentokil’s shares, which had previously suffered due to a post-COVID market slump.

As of mid-morning trading in London, the company’s shares were up by about 12%, valuing Rentokil at approximately £11.8 billion ($15 billion), reported Bloomberg.

This boost comes after a challenging year where Rentokil’s stock value declined significantly, affected by reduced demand in the post-pandemic period, the report highligted.

During the pandemic, Rentokil experienced a surge in business as increased hygiene awareness led to heightened demand for pest control services.

However, as the situation normalized, the company faced a downturn, partly due to the resumption of travel, which briefly increased demand due to concerns over bed bugs in hotels.

Trian’s acquisition is part of a broader strategy that has seen the firm take significant positions in other major companies, including Unilever Plc UL and Ferguson Plc FERG.

Notably, Trian’s involvement often precedes major strategic shifts aimed at enhancing shareholder value, as seen in its push for Ferguson’s re-listing in New York, which led to a substantial increase in its stock price.

With a significant portion of its revenue coming from North America, Rentokil’s current valuation stands at about 17 times its 12-month forward earnings, per the report.

This is considerably lower compared to its U.S. peers, indicating a potential undervaluation issue that Trian might address.

Related: Activist Investor Nelson Peltz Sells Entire Disney Stake For $1B After Losing Proxy Battle

Price Action: RTO shares are trading higher by 13.1% at $30.44 in premarket at the last check Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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