Rentokil share price dips as CMA orders group to sell supply contracts

Shares in Rentokil Initial (LON:RTO) have fallen into the red as the Competition and Markets Authority (CMA) ordered the company to sell several large supply contracts. The move followed the watchdog investigation into the blue-chip group’s merger with Cannon Hygiene.

As of 09:47 GMT, Rentokil’s share price had given up 1.08 percent to 330.50p, underperforming the benchmark FTSE 100 index which currently stands 0.09 percent higher at 6,825.03 points. The group’s shares have added more than 12 percent to their value over the past year, as compared with about a 10.2-percent dip in the Footsie.

Rentokil ordered to sell contracts

The CMA announced in a statement today that Rentokil must sell several large supply contracts to satisfy the watchdog’s concerns over its merger with Cannon Hygiene. The decision follows an in-depth Phase 2 investigation into the merger between the companies, which supply commercial, industrial and public buildings with items and services such as soap dispensers, air sanitisers and sanitary waste disposal.

The CMA’s findings showed that the Rentokil and Cannon, who are two of the three major suppliers of washroom waste disposal, would reduce the choice of suppliers available to these customers, and that the effect would not be offset by competition from other suppliers. The CMA therefore decided that Rentokil / Cannon must sell all contracts with customers who have premises nationally and across multiple regions, which were serviced by Cannon prior to the merger.

Analysts on FTSE 100 group

The 13 analysts offering 12-month price targets for Rentokil Initial for the Financial Times have a median target of 350.00p on the shares, with a high estimate of 440.00p and a low estimate of 325.00p. As of January 21, the consensus forecast amongst 19 polled investment analysts covering the blue-chip group has it that the company will outperform the market.

As of 10:02 GMT, Friday, 25 January, Rentokil Initial plc share price is 330.50p.