By Jonathan Cable
LONDON, March 30 U.S. conglomerate United Technologies Corp. (UTX.N) is to buy the electronic security division of British services group Rentokil Initial (RTO.L) for 595 million pounds ($1.2 billion), the two firms said on Friday.
United Technologies Corp. (UTC), which makes products ranging from Pratt & Whitney jet engines to Otis elevators, said the deal would boost UTC Fire & Security protection services.
"This acquisition builds UTC's scale and capability in the electronic security business which we regard as attractive in national markets where we have significant presence," UTC Chairman and Chief Executive Officer George David said.
UTC, based in Hartford, Connecticut, also said on Friday it planned to sell its low-technology manned guarding business in Australia and the UK in a move to reposition itself towards the high-tech and higher margin areas of guarding.
Rentokil, whose businesses include rat catching and tropical plant hire, said it would use the cash from the sale of its Initial Electronic Security Group, which sells burgler alarms, security access cards and closed-circuit TV cameras, to cut debt. It expects the deal to complete before the end of June.
Rentokil has been selling off businesses to focus on its most profitable operations, after fending off an attempt by British businessman Gerry Robinson to install himself as executive chairman and return cash to shareholders in 2005.
Charles Stanley and UBS analysts had forecast the division could fetch around 500 million pounds.
Panmure Gordon analysts said the price was slightly below their expectations but following the sale the group becomes more focused and could become a takeover target.
"The sale price of the Electronic Security business was slightly below our expectations, but the important point is that the group is now more focused and is more easily digestible should a predator emerge," they said.
The unit posted a 2006 adjusted operating profit of 40.4 million pounds on revenue of 282.1 million pounds for 2006.
UTC said the combined revenues of the guarding businesses in Australia and the UK was slightly less than $550 million.
Rentokil has offloaded its UK, Canadian, U.S. and Belgian guarding businesses in the year as well as its Initial Style Conferences business as it focuses on more profitable areas including its largest unit, Textiles and Washroom Services.
"Completing this transaction will be a significant step towards focusing our resources on those businesses where we are best positioned to create additional value for shareholders," Chief Executive Doug Flynn said.
Earlier in March, Rentokil rebranded its tropical plants rental unit to boost revenues and profits but analysts at Seymour Pierce said the move could be a precursor to its sale, which they estimate could fetch up to 85 million pounds.
Shares in Rentokil, which have lagged the UK support services sector .FTASX2790 by 10 percent over the last 12 months, were up 2.7 percent at 163 pence by 1240 GMT, valuing the group at around 3 billion pounds.
UTX shares closed at $64.99 on Thursday, valuing it at around $65 billion.
Rentokil Initial is being advised by Greenhill & Co. International LLP.
((Editing by Leslie Gevirtz/Will Waterman/Paul Gallagher; Reuters messaging: rm://email@example.com; +44 20 7542 4688; Email firstname.lastname@example.org))
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