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On Thursday, Deutsche Bank (ETR:DBKGn) maintained a positive stance on Rentokil Initial Plc (LON:RTO:LN) (NYSE:RTO), as analyst Dominic Edridge reiterated a Buy rating and a price target of GBP 4.25. The endorsement comes in light of Rentokil’s recent announcement regarding the divestiture of its France Workwear business.
Rentokil Initial has agreed to sell its France Workwear division to HIG Capital for a gross enterprise value (EV) of $465 million, which includes an earn-out mechanism potentially worth up to $34 million. This earn-out is contingent on the business’s performance in the fiscal year 2026. If the earn-out is fully realized, the transaction’s EV to EBIT (earnings before interest and taxes) multiple for fiscal year 2024 is projected at 8.2 times.
This valuation is notably lower than that of Rentokil’s European peers in the textile rental sector, such as Johnson Service Group and Elis, which are trading at approximately 11.5 to 14 times their forecasted fiscal year 2024 EV/EBIT. A distinguishing factor highlighted by Edridge is that, unlike its peers, Rentokil’s France Workwear business operates solely within one territory and does not hold a position as a market leader.
The expected net cash proceeds from the sale are estimated to be around $420 million, which will be subject to adjustments at closing and the final outcome of the earn-out. Rentokil Initial anticipates that the transaction will be completed in the fourth quarter of 2025.
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