TERMINIX GLOBAL HOLDINGS, INC. Item 8.01. Other Events.
As previously disclosed, onDecember 13, 2021 ,Terminix Global Holdings, Inc. ("Terminix"), Rentokil Initial plc ("Rentokil Initial"),Rentokil Initial US Holdings, Inc. , a wholly owned subsidiary of Rentokil Initial ("Bidco"),Leto Holdings I, Inc. , a direct, wholly owned subsidiary of Bidco ("Merger Sub I") andLeto Holdings II, LLC , a direct, wholly owned subsidiary of Bidco ("Merger Sub II" and, together with Merger Sub I, "Merger Subs") entered into an Agreement and Plan of Merger, as amended by Amendment No. 1, dated as ofMarch 14, 2022 (as it may be further amended from time to time, the "Merger Agreement"), that provides for the acquisition of Terminix by Rentokil Initial. On the terms and subject to the conditions set forth in the Merger Agreement, (1) Merger Sub I will merge with and into Terminix (the "First Merger") with Terminix surviving the First Merger as a wholly owned subsidiary of Bidco, and (2) immediately following the effective time of the First Merger, Terminix will merge with and into Merger Sub II (the "Second Merger" and, together with the First Merger, the "Transaction") with Merger Sub II surviving the Second Merger as a direct, wholly owned subsidiary of Bidco and an indirect, wholly owned subsidiary of Rentokil Initial. OnSeptember 7, 2022 , Terminix filed a definitive proxy statement (the "Definitive Proxy Statement") with theU.S. Securities and Exchange Commission (the "SEC") in connection with the Transaction. In connection with the Transaction, six complaints have been filed by purported Terminix stockholders against Terminix and its directors, and two draft complaints have been sent to Terminix. The complaints are captioned Ferreiro v.Terminix Global Holdings, Inc. , et al., No. 1:22-cv-04987 (S.D.N.Y.); Justice v.Terminix Global Holdings, Inc. , et al., No. 1:22-cv-05519 (S.D.N.Y.); Baker v.Terminix Global Holdings, Inc. , et al., No. 1:22-cv-05524 (S.D.N.Y.); Morgan v.Terminix Global Holdings, Inc. , et al., No. 1:22-cv-07977 (S.D.N.Y.); Kaufmann v.Terminix Global Holdings, Inc. , et al., No. 1:22-cv-08071 (S.D.N.Y.); and Kent v.Terminix Global Holdings, Inc. , et al., No. 1:22-cv-01225 (D. Del.), and the draft complaints are captioned Paxton v.Terminix Global Holdings, Inc. , et al. (which does not specify any court) and Nathan v.Terminix Global Holdings, Inc. , et al. (S.D.N.Y.) (such complaints and draft complaints collectively, the "Transaction Litigation"). The Transaction Litigation generally alleges that the preliminary registration statement filed with theSEC onJune 7, 2022 , or the Definitive Proxy Statement, omitted certain allegedly material information in connection with the Transaction in violation of federal proxy laws, and one of the complaints further alleges that the Terminix directors further breached their fiduciary duties in connection with the Transaction and that Terminix aided and abetted that breach. The complaints seek various remedies, including: enjoining the consummation of the Transaction; rescission of the Transaction, or rescissory damages in the event the Transaction is consummated without the allegedly material disclosures; declaring the Merger Agreement unenforceable; directing dissemination of additional allegedly material disclosures; declaring that Terminix and its directors violated federal proxy laws; awarding plaintiffs costs and an allowance for attorneys' and experts' fees; and an accounting to the plaintiffs for any damages allegedly suffered. Given the early stage of each of the proceedings, it is impossible to predict the outcome or to estimate possible loss or range
of loss. Terminix denies the allegations in the Transaction Litigation, denies any alleged violations of law or any legal or equitable duty, and believes that the claims asserted in the Transaction Litigation are without merit and no additional disclosures are required under applicable law. However, in order to moot plaintiffs' unmeritorious claims, avoid the risk of the Transaction Litigation delaying or adversely affecting the Transaction and to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, Terminix has determined to voluntarily supplement the Definitive Proxy Statement, as described in this Current Report on Form 8-K. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, Terminix specifically denies all allegations in the Transaction Litigation and that any additional disclosure was or is required. As a result of the supplements set forth herein, the plaintiffs in these actions have agreed to voluntarily dismiss their complaints in the pending litigations with prejudice. As previously disclosed, Terminix expects to hold its special meeting of stockholders onOctober 6, 2022 , at which meeting Terminix stockholders will be asked to consider and vote on (1) a proposal to adopt the Merger Agreement and (2) a proposal to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to Terminix's named executive officers that is based on or otherwise relates to the Transaction. 2
Supplements to the Definitive Proxy Statement in Connection with the Transaction
Litigation
This supplemental information to the Definitive Proxy Statement should be read
in conjunction with the Definitive Proxy Statement, which should be read in its
entirety. All page references in the information below are to pages in the
Definitive Proxy Statement, and all terms used but not defined below shall have
the meanings set forth in the Definitive Proxy Statement. To the extent the
following information differs from or conflicts with the information contained
in the Definitive Proxy Statement, the information set forth below shall be
deemed to supersede the respective information in the Definitive Proxy
Statement. New text within the amended and supplemented language from the
Definitive Proxy Statement is indicated in bold, underlined text, and deleted
text within the amended and supplemented language from the Definitive Proxy
Statement is indicated in strikethrough text.
The section of the Definitive Proxy Statement entitled "The Merger Proposal - Background of the Transaction" is amended and supplemented as follows:
The fourth full paragraph under the heading "Background of the Transaction" on page 77 of the Definitive Proxy Statement is amended and supplemented as follows:
OnOctober 1, 2021 ,Andy Ransom , Rentokil Initial's Chief Executive, separately contactedNaren K. Gursahaney , Chairman of the Terminix board of directors, and onOctober 4, 2021 ,Brett T. Ponton , Terminix's Chief Executive Officer, to inquire as to whether Terminix would be amenable to discussing a potential strategic combination with Rentokil Initial.Mr. Ransom indicated that Rentokil Initial could be in a position to submit a formal proposal for a transaction in the coming weeks. The members of the Terminix board of directors were subsequently notified of the inquiry, and Terminix management contacted representatives of Lazard andWachtell Lipton to discuss next steps. The full Terminix board of directors participated in the review and approval of the merger agreement and of the transactions contemplated by the merger agreement.
The second full paragraph on page 79 of the Definitive Proxy Statement is amended and supplemented as follows:
OnOctober 29, 2021 , Messrs. Ponton and Persson met withMr. Ransom to discuss a potential transaction between Terminix and Rentokil Initial.Mr. Ransom orally conveyed the terms of a proposal by Rentokil Initial to acquire Terminix, a written copy of which was delivered to Messrs. Ponton and Persson after the conclusion of the meeting. The proposal contemplated an implied purchase price of$54.00 per share of Terminix common stock consisting of approximately 80% stock and 20% cash. The proposal also contemplated that Terminix stockholders could elect to receive all cash or all stock merger consideration, subject to proration in the event of oversubscription, and that the consummation of a transaction would not be subject to any financing contingency. In addition,Mr. Ransom raised the possibility that a member of the Terminix board of directors would be appointed to Rentokil Initial's board of directors upon the closing of a transaction. On the same day, Terminix and Party C entered into a nondisclosure agreement containing customary standstill restrictions on Party C, which restrictions would terminate one year from the date of the nondisclosure agreement or, if earlier, in the event Terminix entered into a definitive agreement for a merger with a third party, a third party commenced a takeover bid, tender, or exchange offer for a majority of Terminix's outstanding voting equity and Terminix recommended acceptance or stated that it remained neutral, or Terminix or its subsidiaries filed for or is subject to a proceeding for bankruptcy(which restrictions would terminate in the event Terminix entered into a definitive agreement for a merger with a third party). 3
The paragraph beginning on page 79 and ending on page 80 of the Definitive Proxy Statement is amended and supplemented as follows:
OnNovember 5, 2021 , Terminix and Rentokil Initial entered into a mutual nondisclosure agreement superseding (and which was substantially similar to) the nondisclosure agreement previously agreed to by the parties onMay 4, 2018 . The mutual nondisclosure agreement contained, among other things, customary standstill restrictions, which restrictions would terminate with respect to a party six months from the date of the mutual nondisclosure agreement or, if earlier, in the event a third party entered into a definitive agreement for a merger or other extraordinary transaction with the other party, any of its subsidiaries or their securities or assets, or a third party announced or commenced a tender offer or exchange offer that would result in a merger or other extraordinary transaction with the other party, any of its subsidiaries or their securities or assets (whether or not recommended by the other party). Shortly thereafter, representatives of Rentokil Initial began submitting due diligence requests and, onNovember 9, 2021 , the Terminix board of directors held a meeting at which representatives of Lazard reported on the process for addressing these requests. In the following weeks throughDecember 8, 2021 , and with the authorization of the Terminix board of directors, representatives of Terminix provided Rentokil Initial with access to a virtual data room, hosted diligence sessions for the benefit of Rentokil Initial and responded to numerous diligence requests and questions. Representatives of Rentokil Initial also provided Terminix with access to a virtual data room containing various due diligence materials and hosted due diligence sessions with representatives of Lazard and members of Terminix management, including a discussion between representatives of Lazard and Rentokil Initial's financial advisers,Barclays and Goldman Sachs International, regardingWall Street research analyst financial forecasts and consensus estimates relating to Rentokil Initial.
The section of the Definitive Proxy Statement entitled "The Merger Proposal - Opinion of Terminix's Financial Advisor - Financial Analyses - Terminix Financial Analyses" is amended and supplemented as follows:
The table under the subheading "Comparable Public Companies Analysis" on page 94 of the Definitive Proxy Statement is amended and supplemented as follows:
(U.S. dollars in millions) EV/ Market Net Debt & Enterprise EBITDA EBITDA Company Cap Other Value 2022E 2022E Pest Control Peers Rollins, Inc.$ 16,367 $ 204 $ 16,571 24.8 x$ 669 Rentokil Initial 15,444 1,641 17,085 17.8 x 959 Residential Peers FirstService Corporation$ 8,702 $ 805 $
9,507 24.4 x$ 390 Frontdoor, Inc. 3,065 341 3,406 10.1 x 336 HomeServe plc 4,138 829 4,967 11.0 x 452 Leslie's, Inc. 4,234 659 4,893 13.5 x 361 Commercial Peers
ABM Industries Incorporated$ 3,176 $ 291 $ 3,466 6.3 x$ 549 Aramark 9,344 7,301 16,645 11.0 x 1,510 BrightView Holdings, Inc. 1,561 1,094 2,655 8.3 x 319 Cintas Corporation 47,755 3,267 51,022 24.6 x 2,077 Ecolab Inc. 67,362 5,344 72,706 21.4 x 3,402 GDI Integrated Facility Services Inc. 963 151
1,114 10.7 x 105
Market data as of 12/8/2021. Enterprise value includes operating lease liabilities and EBITDA includes operating lease expense (excluding short-term and variable expenses); adjustment is made for comparability with Rentokil Initial financials. "Other" includes equity investments, non-controlling interest and other Enterprise Value items.
4
The table under the subheading "Precedent Transactions Analysis" on page 95 of the Definitive Proxy Statement is amended and supplemented as follows:
Enterprise EV / LTM LTM
Date Announced Acquiror Target Value EBITDA EBITDA
Selected Pest Control Transactions
June 8, 2021 EQT AB Anticimex A/S $ 7,259 25.6 x
GIC Private Anticimex A/S
November 6, 2019 Limited (10% stake)(*) 395 21.2 x 19
Clark Pest
Control of
January 8, 2019 Rollins, Inc. Stockton, Inc. 412 17.0 x 24
Clayton, The ServiceMaster
March 19, 2007 Dubilier & Rice Company 5,316 12.3 x 434
Selected Consumer / Commercial
Transactions
August 31, 2021 Apax Partners LLP SavATree, LLC(*) $ ~1,200 ~22.0 x $ ~55
Roark Capital ServiceMaster
September 2, 2020 Group Inc. Brands 1,553 18.2 x 85
Blackstone Group Servpro
March 26, 2019 Inc. Industries Inc. 1,287 20.1 x 64
Cintas G&K
August 16, 2016 Corporation Services, Inc. 2,165
14.0 x 155
(*) Transaction included for reference purposes only and excluded from
calculations.
The section of the Definitive Proxy Statement entitled "The Merger Proposal - Opinion of Terminix's Financial Advisor - Financial Analyses - Rentokil Initial Financial Analyses" is amended and supplemented as follows:
The table under the subheading "Comparable Public Companies Analysis" on page 97 of the Definitive Proxy Statement is amended and supplemented as follows:
(U.S. dollars in millions) EV/ Market Net Debt & Enterprise EBITDA EBITDA Company Cap Other Value 2022E 2022E Pest Control Peers Rollins, Inc.$ 16,367 $ 204 $ 16,571 24.8 x$ 669
Terminix Global Holdings, Inc. 4,657 851
5,508 12.6 x 436 Residential Peers FirstService Corporation$ 8,702 $ 805 $ 9,507 24.4 x$ 390 Frontdoor, Inc. 3,065 341 3,406 10.1 x 336 HomeServe plc 4,138 829 4,967 11.0 x 452 Leslie's, Inc. 4,234 659 4,893 13.5 x 361 Commercial Peers ABM Industries Incorporated$ 3,176 $ 291 $ 3,466 6.3 x$ 549 Aramark 9,344 7,301 16,645 11.0 x 1,510 BrightView Holdings, Inc. 1,561 1,094 2,655 8.3 x 319 Cintas Corporation 47,755 3,267 51,022 24.6 x 2,077 Ecolab Inc. 67,362 5,344 72,706 21.4 x 3,402 GDI Integrated Facility Services Inc. 963 151
1,114 10.7 x 105 Note: Terminix shown on a consensus basis. Market data as of 12/8/2021. Enterprise value includes operating lease liabilities and EBITDA includes operating lease expense (excluding short-term and variable expenses); adjustment is made for comparability with Rentokil Initial financials. "Other" includes equity investments, non-controlling interest and other Enterprise Value items. 5
The first paragraph under the subheading "Discounted Cash Flow Analysis" on page 97 of the Definitive Proxy Statement is amended and supplemented as follows:
Lazard performed a discounted cash flow analysis of Rentokil Initial by calculating, based on the Terminix management unaudited Rentokil Initial projections, the estimated present value (as ofJune 30, 2021 ) of the stand-alone unlevered, after-tax free cash flows that Rentokil Initial was forecasted to generate during the third and fourth quarters of calendar year 2021 and during calendar years 2022 through 2025. Lazard also calculated a range of implied terminal values for Rentokil Initial by applying a selected range of perpetuity growth rates of 2.0% to 2.5% to the stand-alone unlevered, after-tax free cash flow attributable to Rentokil Initial for calendar year 2025, which range of perpetuity growth rates was selected based on Lazard's professional judgment and experience, taking into account, among other things, the Terminix management unaudited Rentokil Initial projections and trends in the overall economy generally and in the industries and sectors in which Rentokil Initial operates. The cash flows and range of implied terminal values were then discounted to present value (as ofJune 30 , 2021September 30, 2021) using a selected range of discount rates of 5.3% to 6.3% derived based on a weighted average cost of capital calculation. The section of the Definitive Proxy Statement entitled "The Merger Proposal - Opinion of Terminix's Financial Advisor - Financial Analyses - Other Analyses" is amended and supplemented as follows:
The paragraph under the subheading "Analyst Target Prices" on page 99 of the Definitive Proxy Statement is amended and supplemented as follows:
Lazard observed price targets for Terminix common stock and Rentokil Initial ordinary shares as reflected in selected publicly availableWall Street equity research reports. Lazard observed that (x) the future price targets for Terminix common stock ranged from$44.00 per share to$65.00 per share, which Lazard discounted to present value based on an illustrative cost of equity of 9.4% to calculate a range of$41.10 per share to$58.10 per share (rounded to the nearest$0.05 ), and (y) the price targets for Rentokil Initial ordinary shares ranged from £5.10 per share to £6.50 per share. The price targets for Terminix common stock and Rentokil Initial ordinary shares as reflected in selected publicly availableWall Street equity research reports are set forth below. Terminix Broker Targets Broker Publish Date Price Target Goldman Sachs 11/4/21$ 44.00 Jefferies 11/3/21$ 58.00 Oppenheimer 11/2/21$ 65.00 Stifel 11/2/21$ 64.00 Bank of America 11/2/21$ 49.00 RBC 11/2/21$ 49.00 Morgan Stanley 11/2/21$ 46.00 Baird 11/2/21$ 45.00 JP Morgan 8/5/21$ 55.00 6 Rentokil Initial Broker Targets Broker Publish Date Price Target BNP Paribas Exane 11/23/21 £ 6.20 Peel Hunt 11/8/21 £ 5.95 Berenberg 11/1/21 £ 5.10 Morgan Stanley 10/21/21 £ 6.45 Credit Suisse 10/21/21 £ 6.30 Jefferies 10/21/21 £ 6.50 Stifel 10/21/21 £ 6.30 Barclays 10/21/21 £ 6.10 Citi 9/29/21 £ 6.00 Deutsche Bank 8/4/21 £ 6.07 Jefferies 7/30/21 £ 6.50 RBC Capital 7/29/21 £ 6.45 Numis 7/29/21 £ 6.00 Goldman Sachs 3/25/21 £ 5.60 HSBC 2/5/21 £ 5.55
The section of the Definitive Proxy Statement entitled "The Merger Proposal - Certain Terminix Unaudited Prospective Financial Information" is amended and supplemented as follows:
The second table on page 104 of the Definitive Proxy Statement is amended and supplemented as follows:
(
2025E
Revenue $ 2,046 $ 2,164 $ 2,322 $ 2,479 $ 2,651
Adjusted EBITDA(2) 413 445 496 560 629
Capital Expenditures (23 ) (33 ) (32 ) (35 ) (39 )
Free Cash Flow(3) 199 232 317 361 410
Note: Unlevered Free Cash Flow was arithmetically derived by Lazard based on the
Lazard fairness opinion Terminix management unaudited Terminix projections
prepared and provided to Lazard by Terminix management and approved by Terminix
management for use by Lazard for purposes of its opinion and financial analysis.
Lazard derived the estimated Unlevered Free Cash Flow for Terminix as
tax-effected Adjusted EBITDA, less increase in net working capital, less capital
expenditures and other operating cash flow items, for fiscal years 2021 through
2025 in the amounts of $262 million , $268 million , $352 million , $398 million
and $447 million , respectively. 2021 is disclosed on a full-year basis for
comparability.
(1) Excludes the impact of acquisitions in 2023E - 2025E. (2) "Adjusted EBITDA" is defined as net income (loss) before: depreciation and
amortization expense; acquisition-related costs; Mobile Bay Formosan termite
settlement; fumigation related matters; non-cash stock-based compensation
expense; restructuring and other charges; goodwill impairment; amortization
of cloud based software; net earnings from discontinued operations; provision
for income taxes; loss on extinguishment of debt; interest expense; and
operating lease expense. (3) "Free Cash Flow" is defined as Adjusted EBITDA, less increase in net working
capital, less capital expenditures, less interest, less taxes, less
restructuring payments, less acquisition-related costs and other operating
cash flow items.
The table beginning on page 104 and ending on page 105 of the Definitive Proxy Statement is amended and supplemented as follows:
(UK pounds sterling in millions)(1) 2021E 2022E 2023E 2024E 2025E Revenue £ 2,980 £ 3,131 £ 3,289 £ 3,437 £ 3,591 Adjusted EBITDA(2) 670 726 774 825 881 Capital Expenditures (260 ) (260 ) (270 ) (289 ) (302 ) Free Cash Flow(3) 296 334 370 399 434 Note: Unlevered Free Cash Flow was arithmetically derived by Lazard based on the Terminix management unaudited Rentokil Initial projections prepared and provided to Lazard by Terminix management and approved by Terminix management for use by Lazard for purposes of its opinion and financial analysis. Lazard derived the estimated Unlevered Free Cash Flow for Rentokil Initial as tax-effected Adjusted EBITDA, less increase in net working capital, less capital expenditures and other operating cash flow items, for fiscal years 2021 through 2025 in the amounts of £334 million, £371 million, £407 million, £436 million and £471 million, respectively. 2021 is disclosed on a full-year basis for comparability.
(1) Excludes the impact of acquisition in 2021E - 2025E. (2) "Adjusted EBITDA" is defined as adjusted operating profit, less one-off
operating items, plus depreciation and other items. (3) "Free Cash Flow" is defined as net cash flow from operating activities, less
capital expenditures, and less net additions and disposals of right-of-use
assets. Based on financial forecasts and estimates provided by Terminix
management.
* * * *
7
Additional Information About The Transaction And Where To Find It
In connection with the Transaction, Rentokil Initial has filed with theSEC a registration statement on Form F-4 (the "Registration Statement"), which includes a proxy statement of Terminix that also constitutes a prospectus of Rentokil Initial (the "proxy statement/prospectus"). TheSEC declared the Registration Statement effective onSeptember 7, 2022 . OnSeptember 7, 2022 , Terminix filed the Definitive Proxy Statement with theSEC in connection with the Transaction. Each of Rentokil Initial and Terminix have filed and may file other relevant documents in connection with the Transaction. The Definitive Proxy Statement was first sent to the shareholders of Terminix onSeptember 8, 2022 . Rentokil Initial has also filed a shareholder proxy circular in connection with the Transaction with applicable securities regulators in theUnited Kingdom and the shareholder proxy circular was first sent to Rentokil Initial's shareholders on or aboutSeptember 8, 2022 . This communication is not a substitute for any registration statement, proxy statement/prospectus or other documents Rentokil Initial and/or Terminix filed or may file with theSEC in connection with the Transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISIONS, INVESTORS, STOCKHOLDERS AND SHAREHOLDERS OF TERMINIX AND RENTOKIL INITIAL ARE URGED TO READ CAREFULLY AND IN THEIR ENTIRETY THE DEFINITIVE PROXY STATEMENT AND SHAREHOLDER PROXY CIRCULAR, AS APPLICABLE, AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC OR APPLICABLE SECURITIES REGULATORS IN THEUNITED KINGDOM , AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS IN CONNECTION WITH THE TRANSACTION WHEN THEY BECOME AVAILABLE, AS THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT TERMINIX, RENTOKIL INITIAL, THE TRANSACTION AND RELATED MATTERS. The Registration Statement and Definitive Proxy Statement are, and the other documents filed by Rentokil Initial and Terminix with theSEC , when filed, will be, available free of charge at theSEC's website at www.sec.gov. In addition, investors and shareholders are able to obtain free copies of the Definitive Proxy Statement and other documents filed with theSEC by Terminix online at investors.terminix.com, upon written request delivered to Terminix at 150 Peabody Pl.,Memphis, TN 38103,USA , Attention: Corporate Secretary, or by calling Terminix's Corporate Secretary's Office by telephone at +1 901-597-1400 or by email at deidre.richardson@terminix.com, and are able to obtain free copies of the Registration Statement, Definitive Proxy Statement, shareholder proxy circular and other documents filed with theSEC and applicable securities regulators in theUnited Kingdom by Rentokil Initial online at https://www.rentokil-initial.com, upon written request delivered to Rentokil Initial at Compass House, Manor Royal,Crawley ,West Sussex , RH10 9PY,England , Attention:Peter Russell , or by calling Rentokil Initial by telephone at +44 (0) 7811 270734 or by email at investor@rentokil-initial.com. The information included on, or accessible through, Rentokil Initial's or Terminix's website is . . .
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