Rival swoops for Initial Facilities

A major facilities services firm that employs 22,000 UK staff and counts clients including Transport for London and Debenhams is to be sold to a rival in a £250 million deal.

Rentokil has agreed to sell its facilities management arm to Interserve for £250 million.
Rentokil has agreed to sell its facilities management arm to Interserve for £250 million.

Pest control-to-hygiene group Rentokil Initial has agreed to sell its Initial Facilities business - which provides a wide range of services such as catering, cleaning, security and building maintenance - to support services and construction group Interserve.

Interserve signalled the possibility for job losses following the deal as it aims to make savings of £5 million by the end of next year, with plans to strip out duplicated functions in corporate support and operational management.

It said it was too early to give details, but added the number of job cuts was likely to be minimal.

Initial Facilities employs 25,000 staff in total, including around 3,000 in Spain and more than 22,000 nationwide across the UK and Ireland.

The deal will catapult Interserve into a top three provider of support services in the UK and give it a stronger presence in the £70 billion a year facilities management market.

Reading-based Interserve employs around 30,000 staff across all its divisions and 27,000 within its facilities arm, which handles mainly public sector contracts, with clients including the BBC, Ministry of Justice and Ministry of Defence.

Its acquisition of Initial Facilities - expected to complete by the end of March, subject to shareholder approval - will see it add a large roster of private sector clients, including DIY chain B&Q, car firm Nissan and investment bank JP Morgan.

While 85% of Initial Facilities clients are in the private sector, its largest client is Transport for London and it also handles work for National Rail.

The move to offload the division follows Rentokil's sale of parcel delivery service City Link last year and comes in line with its aim to focus on pest control, hygiene and workwear.

Annual results also out today for both Rentokil and Interserve show improving profits.

Interserve saw underlying profits rise 8% to £81.1 million in 2013, driven by the recovery in house building, which offset weak international construction activity earlier in the year.

The group raised £74.8 million through a share placing to help fund the Initial Facilities deal.

Gatwick-based Rentokil posted underlying pre-tax profits of £62.6 million - up 0.5%, with foreign exchange movements stripped out.

But its Initial Facilities division saw p rofits fall sharply to £8.4 million from £15 million in 2012.