PSIRU Company Details

Company Name: BET

Home country: UK

BET (British Electric Traction) plc

Stratton House

Picadilly

LONDON W1X 6AS

Tel: 0171 629 8886

Fax: 0171 499 5118

European Works:

Directors

DIRECTORS:

Chairman: Sir Christopher Harding. Previous directorships: Hanson plc, Chairman of British Nuclear Fuels.Current directorships: Hanson, GEC, Legal and General, BET.

Chief Executive: L John Clark appointed in April 1991, to try and get BET out of financial mess. Previous directorships: Singer Co for Europe, Africa and Middle East. Current directorships: Rolls Royce,

The Rt Hon Christopher Chataway Previous directorships: Chairman Civil Aviation Authority.Former Tory goverment minister

The RT Hon Lord Tebbit, Chair of BET's Remuneration Committee.Former: Secretary of State for Employment and Trade and Industry.Chairman of Conservative Party.Current directorships: BET, BT, Sears, The Spectator.

George Duncan, Lord Mark Fitzalan Howard, Robert MacKenzie, John Allan.

In July ‘94 Robert MacKenzie left his post as Finance Director, receiving a pay-off of £450,000. Size of this pay-off mainly due to the 3-yr rolling contract signed in November 1991, which guaranteed him 3 years’ notice from BET. This development follows BET’s decision to appoint Keith Payne, who joined the main board last year as director of strategic planning, to the post of director of finance, planning and development.

John Allan - in charge of the development services group, which includes Initial and BET Catering. Other directors include former Conservative ministers Norman Tebbit and Christopher Chataway, and leading CBI activists Sir Timothy Bevan (also of Barclays Bank) and George Duncan (also chair of ASW, Whessoe and Household Mortgage Corporation).David Evans (Conservative MP, close to Mrs. Thatcher) is also on the board of Initial. This is because the Exclusive group of companies, which Evans owned and ran, were taken over by BET in 1986.

DIRECTOR EARNINGS:

John Clark received an annual salary of £545,000 for the year ending March 1993 and a staggering £924,000 in 93-94 which includes £281,000 in bonuses and £163,000 pension contributions. Appointed in 1991, he is on a 3-yr rolling contract.

Christopher Harding received £165,000 for the year ending March 1993. Hanson plc whom Christopher Harding is also a director donated £100,000 in both 1992 and 1993.

Last Updated:

PSIRU Capsule
Merged into Rentokil Initial in 1996. HISTORY: BET plc is a large multinational company based in the UK, but with operations in Europe and North America. In May 1996 BET was taken over by Rentokil plc to form Rentokil Initial plc. Background to this takeover and to both companies involved is provided in the PSPRU Briefing 14/96 attached to this profile. BET SUBSIDIARY COMPANIES: BET is involved in providing a number of services, the main ones being: * Textile * Plant * Cleaning * Distribution * Security * Other services (including Catering and Facilities Management). Through its subsidiary companies providing cleaning, security, catering and facilities management BET has more involvement in contracting out/market testing in the UK than any other parent company. The full name of the firm is Initial Contract Services. Other names or abbreviations used include: Initial; ICS; Initial Healthcare. Initial also operates contracts originally won by firms which were later taken over by BET (mainly in 1985 and 1986). These include: Blue Arrow; Exclusive; ICC; Reckitt; Advance. The well known Initial towel rental services are carried out by Initial Textile Services. Other BET subsidiaries involved in contracted-out public services working the UK include: Shorrock Guards (security); BET Catering(catering); BET FM (facilities management). BET is also involved in hiring contract labour in various industries: Hestair Management Services (office staff); Hestair Computer Group, Knight Programming Support Ltd (contract computer personnel); Johnson Hire Ltd (contract labour). BET has cleaning, security, or contract labour subsidiaries around the world: BET Schoonmaakbedriijven Netherlands Initial Schoonmaakdiensten Netherlands Varel Alarmgroep BV Netherlands Limpiezas Initial Spain Arcade Building Maintenance Inc USA Southern Services Inc USA Talent Tree Personnel Services Inc USA Nurses Inc USA Initial Holdings Singapore Initial Environmental Services Hong Kong Initial Services Malaysia In November 1994 BET reported a 25% increase in pre-tax profits from £46.1m. to £57.7m for the 6 months to October 1st. Business services - comprising cleaning, personnel, security, catering and facilities management - saw sales increase 2% to £370m, although operating profit fell 14% to £11m. SECTORS: Cleaning Subsidiaries: Initial Cleaning Services, Initial Contract Services, Initial Healthcare, Initial Supplies. Foreign cleaning subsidiaries operate in USA, Netherlands and Spain. Textiles Subsidiaries: Allied Laundrycraft, Initial Textile Services, Initial UK Ltd. Security Subsidiaries: Shorrock Ltd, Walport International Ltd, Safeguards. Other Services Subsidiaries: BET Catering Services Ltd, BET Facilities Management, Hestair Computer Group plc, HMS Personnel Services Ltd. Other Services (Personnel): Supplying temporary workers. Made an overall loss. Catering: Expanded in the UK winning further contracts in schools. The catering business showed a profit in its first full year and is the largest commercial contractor to the UK education sector. Facilities Management: This business was started up in 1992-3 and has won a number of large contracts. PSPRU Briefing Number 14/96 9 August, 1996 Rentokil’s Takeover Of BET Briefing 14/96 was originally prepared for the TUC’s multi-nationals project meeting, on the 24 June 1996, by the PSPRU. Rentokil’s recent takeover of BET makes it one the largest service companies in the world and one of the largest employers in Europe. The £2.1b takeover cost Rentokil £90m and BET some £24m in its defence. This paper provides an analysis of the takeover and the likely structure that the new company will take and its implications for trade union membership, recognition and European wide representation. STRUCTURE Summary 1. Some Immediate Results of the Takeover 2. Rentokil’s Restructuring Strategy 3. Rentokil’s Rejected Operations 4. European Employee Implications 5. The Companies 5.1 Rentokil 6. Sophus Berendsen 7. BET Summary Rentokil is committed to integrating the following UK activities of BET; Cleaning, Facilities Management, Catering, Personnel, Security, Textile Services and Distribution. For Europe; Security, Textile Services. The vast majority of BET’s union membership are in these sections. Rentokil is committed to developing the Initial service name alongside that of Rentokil. It has renamed BET Catering, Initial Catering, remarking that Rentokil was not a good name for a catering company. Rentokil will dismantle the Plant, Education & Training and Leisure activities of BET. It has already sold for £2.8m BET's aluminium tower and ladders manufacturing businesses to construction group John Mowlem. Civil Service unions may have members in the Education & Training division as a result of contracting out. AEEU or other manufacturing unions may have members in the business sold to John Mowlem Rentokil through its subsidiaries has now become the company with the highest number of contracts, 212, recorded on the PSPRU database. It also has the largest number of NHS contracts. Rentokil’s overall management structure, and its use of profit centres will more likely determine de-centralised bargaining and localised negotiations. The establishment of a works council could mitigate against this. The majority of BET’s board, including Baron Tebbit, have been dismissed. The former chief executive has launched a £3m law suit for compensation against Rentokil. As a result o the merger Rentokil’s parent company, Sophus Berendsen will no longer have a majority share holding. Its ownership percentage has been reduced from 51% to 36%. 1. Some Immediate Results of the Takeover 1.1 Sophus Berendsen: As a result of the takeover the company’s holding of Rentokil will be an unchanged 510.6m 2 pence shares. Rentokil’s capital increase does however, imply that Sophus Berendsen’s ownership of Rentokil will be significantly diluted from the present 51.7% to 36%. 1.2 Rentokil: An extensive review of BET is underway and the Financial Times says it is "focusing in particular on its underperforming cleaning, catering and personnel businesses." BET's large London headquarters will be sold. More will be invested in areas of overlap such as security and textile services. According to Rentokil’s corporate director, Charles Grimaldi, the company’s review will remain in line with the programme outlined in the company’s final bid document. He also commented that full details would be made available to the public in the company’s next quarterly report, available on the 22 August 1996. In a recent press statement he said "Rentokil isn't really a good name for a catering company so we will be pulling the catering under the Initial brand...... Initial will operate a second brand alongside Rentokil." This supersedes the brand strategy announced only a week earlier by BET whereby each part off its catering operation had been given a different name. Catering & Hotel Keeper: 1/5/96 1.3 Sell-Off: On 30 April Rentokil began the sell-off of non-core businesses acquired from BET, with a £2.8m sale of BET's aluminium tower and ladders manufacturing businesses to construction group John Mowlem. Rentokil said during the takeover battle that it would review the operations of about 30 per cent of BET's businesses. The City is expecting further sales to help finance the bid. Source: 30 April 96 The Times 1.4 Directors: Rentokil has cleared out much of the BET board following the takeover, Sir Christopher Harding, chairman, and chief executive John Clark led the list of departures. Rentokil confirmed that it remained in dispute with Mr Clark over his redundancy package. Lawyers for John Clark, have issued a writ against Rentokil claiming £3.2m compensation for loss of office after he was dismissed. Source: 17 June 96 Reuter Textline 1.5 Public Sector: In public sector terms, through its subsidiaries it has the largest number of NHS support service contracts, (126) recorded on the PSPRU database. In total it has 212 contracts recorded on the PSPRU database across Central Government, the NHS and Local Authorities in the following services. Building cleaning, Building management, Catering, Cleaning, Domestic, Facilities management, Hotel, Laundry, Porter, School meals, Secretarial/typing, Security & Telephonists. Its principal subsidiaries are Initial, BET Catering now renamed Initial Catering, Mediguard & Securiguard. 1.6 Industrial Relations: In the public sector there will be a conflict of styles in terms of industrial relations, as BET were more likely to talk and work with trade unions than Rentokil or its main health subsidiary Mediguard. 1.7 Finances: The following table seeks to merge both companies economic performance by sector and geographical region. The BET figures are from the 1993 annual report. Activity Turnover £m Operating Profits £m Textiles 249.7 24.9 Cleaning 396.8 20.4 Security 283.3 26.1 Healthcare & Hygiene 255.3 80.2 Other, including distribution & catering 783.4 45.6 Pest control & Tropical Plants 300.2 86.7 Plant services 598.2 25.5 Total 2,863.9 309.4 Total Rentokil 860 208 Total BET 2,003 101.4 Region Turnover £m % Of Total UK 1,405.6 49.07 Europe 561.5 19.60 North America 713.4 24.91 Asia Pacific, Africa, South America 183.4 6.40 Total 2,863.9 100 2. Rentokil’s Restructuring Strategy 2.1 Rentokil’s Management: Rentokil has been driven to takeover BET by its very ambitious commitment to its shareholders of 20% per year growth in profits and earnings per share. The company claims its management approach is sharply focused on growth in cash generation, profits and earnings per share. It claims to use the following managerial approach. For industrial relations purposes it is a management style suited to de-centralised collective bargaining. It includes. * Running all businesses in the same style using similar strict operating and financial systems and controls across all services. * The operation of a lean organisation based on a branch concept where profit responsibility and accountability is devolved down the organisation as far as possible. * Relentless monitoring of performance against profit and cash flow budgets and forecasts * Constant benchmarking, branch against branch, business against business, country against country, to identify and implement best practice 2.2 Restructuring: Rentokil claim that acquisition of BET creates the opportunity for immediate and continuing benefits from: Management: The rationalisation of BET’s head office and divisional management structure. This means: The integration into Rentokil’s geographic management structure for BET’s. UK: Distribution management Europe: Cleaning management Activities: The integration of those activities where there is significant direct overlap and where integration will yield immediate and continuing savings. This means for the UK: Cleaning, Facilities Management, Catering, Personnel, Security, Textile Services For Europe: Security, Textile Services 2.3 Identification of BET Companies: Based on the above mission statement from the Rentokil bidding document the following list identifies the BET UK companies that fit into the Rentokil plan - under the categories of Sector, BET Company, Business, and Employment and Union where known: Cleaning - Initial Contract Services - Contract services - 38,471 - UNISON, GMB,TGWU, ISTC Cleaning - Initial Healthcare Services - Cleaning - 4,500 (4,000 part-time) - UNISON, GMB,TGWU Catering - Bet Catering - Catering - 10,220 - UNISON, GMB,TGWU Facilities Management - BET Management Services - Management & Support Services - 608 - CPSA, PTC Security - Initial, formerly Sentinel Security - Protective services - 104 Shorrock Ltd - Radio & Television Broadcasting and Security Equipment Manufacturers - 899 Textiles - Initial UK - Garment manufacturing - 4,581 Personnel - BET Personnel Services Plc (Parent Company) - Holding Company for employment agencies Personnel - HMS Personnel - Employment agency - 227 - CPSA, PTC Personnel - HMS Engineering - Employment agency - AEEU, CWU Distribution Services - United Transport Tankers - Hauliers - 895 - TGWU & URTU Shorrock Guards, sold to Securicor January 1996 2.4 New Structure: The best guess new structure amalgamating both Rentokil and BET companies - using the categories of company, sector, business and employment and union where known: Initial Contract Services, (incorporating BET Catering) - Cleaning & Catering - Contract services - 48,691 - UNISON, GMB, TGWU, ISTC Initial Healthcare Services, Mediguard - Cleaning & Maintenance, Catering - 7,783 - UNISON, GMB,TGWU Rentokil Cleaning Services - Cleaning Services - 6,177 BET Management Services - Facilities Management - Management & Support Services - 608 - CPSA, PTC Rentokil Facilities Management - Plumbing, Heating & Air Conditioning Contractors - 151 Rentokil Office Machinery Maintenance - Equipment Rental & Leasing - 146 Initial, formerly Sentinel Security - Security - Protective services - 104 - GMB? Shorrock Ltd - Radio & Television Broadcasting and Security Equipment Manufacturers - 899 Rentokil Security Services - Protective Services - 3,944 Initial UK - Textiles - Garment manufacturing - 4,581 BET Personnel Services Plc (Parent Company) - Personnel - Holding Company for employment agencies HMS Personnel - Employment agency - 227 - CPSA, PTC HMS Engineering - Employment agency - Unknown - AEEU CWU Portman Recruitment - Personnel Services United Transport Tankers - Distribution Services - Hauliers - 895 - TGWU & URTU City Link Transport - Transport City Messenger Company - Messenger Services Total Employees: 74,206 3. Rentokil’s Rejected Operations 3.1 Rejected Activities: The following section identifies those BET companies that do not fit into the Rentokil strategy and are therefore likely to be surplus to the new organisation. Sector BET Company Employment Union Plant Services Bet Plant Services 4,307 Unknown Education & Training Unidentified Leisure Services Unidentified 3.2 Education & Training and Leisure: It has not been possible to identify the BET subsidiaries who perform the Education and Training services that Rentokil are to reject from incorporation. However, BET do have staff training contracts in the Civil Service. 4. European Employee Implications Given the size of Rentokil’s and BET’s UK and European operations even before the takeover, it is reasonable to assume that the company qualifies for a European Works Council. Therefore a full investigation should be undertaken to ascertain the full geographical and numerical spread of workers across the European Union. 5. The Companies 5.1 Rentokil 5.2 History: Incorporated in 1927 as a Private Company; Re-registered in 1982 as a Public Limited Company. Name changed in 1960 from British Ratin Co Ltd to Rentokil Group PLC. The ultimate holding company was Sophus Berendsen AS (Denmark) but is now majority share holder with 36% of shares issued. 5.3 Activities: The principal activity of the Group is environmental services, including pest control. Other services include healthcare, pest control, security, cleaning, tropical plants, facilities maintenance, medical services, hygiene, hospital services, water and ventilation, communications, personnel services, products and timber preserving, office machine maintenance and property care. 5.4 Employees: In 1995 Rentokil employed 36,858 people (and has added an additional 100,000 with the purchase of BET), and operates in over 60 countries. The company has a low ratio of Administrative and Sales staff overall. 5.6 Organisation: Divided into 5 regional groups: UK, Rest of Europe, USA, Asia and Africa. Each region has its own managing director. The UK has two: Graham Foote and Roger Payne. Rentokil UK and European Subsidiaries. Each is identified by country, company name, and, where known, sector and employee levels: UK Rentokil Ltd, Pest Control, (3, 265) Rentokil Cleaning Services, Cleaning Services, (6, 177) Rentokil Facilities Management, Plumbing, Heating & Air Conditioning Contractors, (151) Rentokil Insurance, Insurance, (8) Rentokil Office Machinery Maintenance, Equipment Rental & Leasing, (146) Rentokil Security Services, Protective Services, (3, 944) Mediguard, Cleaning & Maintenance, Catering, (3, 283) Portman Recruitment, Personnel Services City Link Transport, Distribution City Messenger Company, Distribution Austria Rentokil Austria Pyt, Belgium NV Rentokil GMIC Security Denmark A/S Rentokil Finland Oy Rentokil France Rentokil SA Germany Rentokil GmbH Greece Rentokil Hellas Ireland Rentokil Ltd Italy Calmic Italia Spa Netherlands BV Rentokil Services Norway Rentokil Norge Portugal Rentokil Portugal Servicos Proteccao & Ambiental Lda Spain Rentokil SA Switzerland Rentokil AG 5.8 Finance: 1995 results show turnover up 17.1% on 1994 at £860.1m. Profit before tax £214.5m up 21.2%. UK, turnover grew by 10.9% to £358.5m and profits by 18.7% to £91.3m. Rentokil’s Financial History Parent Year Sales £m Profits £m Employees Paybill £m (000's) Rentokil 1992 444 108 15,092 147 1993 600 147 22,756 221 1994 734 177 30,830 300 1995 860 214 36,858 366 Rentokil’s 1995 Financial breakdown by sector and Geographical region Turnover Pest Healthcare Tropical Security Cleaning Other Total Control Hygiene Plants Medical Services £m £m £m £m £m £m £m 71.5 83.8 9.8 86.5 29.1 77.8 358.5 (UK) 81.2 87.0 19.8 4.8 2.8 195.6 (Europe) 14.4 5.2 52.9 55.3 36.9 0.2 164.9 (NAmer) 36.9 79.3 13.7 0.5 10.7 141.1 (Asia) 204.0 255.3 96.2 146.6 66.5 91.5 860.1 (Total) Pre-Tax-Profit 66.7 80.2 20.2 11.8 5.0 24.3 208.2 * = Pacific and Africa 5.9 Industrial Relations: The company makes no mention of industrial relations structures in its annual report. 5.10 Trade Unions: Mediguard, Rentokil’s healthservice contractor, has not encouraged trade union activities and has in the past cut terms and conditions on NHS contracts. 5.11 Recognition: Mostly refused by Mediguard but some local recognition agreements with UNISON during NHS contracts. 5.12 Directors: C M Thompson: Appointed a director in 1982 and chief executive in 1983. A director of Wellcome plc, Caradon ptc and of Farepak PLC. Held executive appointments in Royal Dutch Shell Group and The Boots Company Ptc. A director of Cadbury Schweppes, Health & Hygiene Division, 1975 to 1982 and managing director from 1978 to 1982. H E St L King: Solicitor. Appointed a director in 1985 and chairman in May 1994. Chairman Denton Hall, solicitors, and director of City Centre Restaurants and several other companies. H K Werdelin: Appointed a director in 1983 and vice-chairman in May 1994. Chief executive and a director of Sophus Berendsen A/S. Chairman of the Danish Timber Company A/S. A director of Novo-Norciisk A/S, Th. Wessel & Vett A/S, C W Obel A/S and several other Danish companies. C T Pearce: Chartered accountant. Appointed finance director in 1987. A non-executive director of The Burton Group PLC. Formerly a director of County NatWest Limited, 1984 to 1987 and of J Henry Schroder Wagg & Co. Limited, 1981 to 1984. Chairman of the Technical Committee of The Hundred Group of Finance Directors. D G Heywood: Certified accountant. Appointed a director in 1991. Chairman of QS Holdings plc, Nestor-BNA plc and Remploy Limited. Formerly deputy chairman and an executive director of British-American Tobacco Company Limited. R Koch-Nielsen: Appointed a director in 1993. Senior partner in the Danish law firm of KochNielsen & Gronbtirg. Chairman of Sophus Berendsen A/S and of several other Danish companies. 6. Sophus Berendsen The company is structured as three wholly owned business sectors and Rentokil. Apart from Rentokil the three sectors cover, Textile Services, Power & Motion Control and Electronics and Data. The three sectors employ 6,600 workers where as 43,500 workers are accounted by Rentokil. As a result of the takeover the company’s holding of Rentokil will be an unchanged 510.6m 2 pence shares. Rentokil’s capital increase does however, imply that Sophus Berendsen’s ownership of Rentokil will be significantly diluted from the present 51.7% to 36%. With the ownership reduced to less than 50% Rentokil will no longer be consolidated into the accounts as a subsidiary, but as an associated company. The key figures for 1995 are presented in the following table to show the impact of treating Rentokil as an associated company. As the table shows the diluted ownership of Rentokil has a significant impact on the presentation of the individual accounts. But Sophus Berendsen claim that with an unchanged share holding, and if the level of Rentokil’s dividend remains the same, they would expect to continue to receive the same aggregate dividend in cash as before the takeover of BET. Table: Sophus Berendsen’s key figures with Rentokil as subsidiary and associated company. Item 1995 as reported by 1995 with Rentokil Sophus Berendsen as associated company Turnover (mDKK) 13,766 6,314 Operating Profit 2,138 317 Average Number of Employees 43,500 6,600 7. BET 7.1 History: BET was a large multinational company based in the UK, but with operations in Europe and North America. BET was involved in providing a number of services, the main ones being: Textiles, Plant, Cleaning, Distribution, Security, Other services (including Catering and Facilities Management). Through its subsidiary companies it provided cleaning, security, catering and facilities management BET had more involvement in contracting out/market testing in the UK than any other UK company. 7.2 Financial Problems: BET's sales and profits looked big enough, but the firm had serious financial problems, because it borrowed a lot of money to buy new subsidiaries, as a result, debts grew too large. This was a major criticism cited by Rentokil in its takeover documents. In April 1991 a new chief executive team was appointed to urgently address the financial and operational problems. A 3 year turn around programme was embarked upon. This included restructuring in order to establish a flatter management structure and the selling or closing of non-profit making subsidiaries. Between 1990 and 1991 the pre tax profit fell by just over £100m and even more dramatically in the following year by almost £200m. In 1993 the company made a £9.8m loss with a further major problem facing the company being a debt of £425m. By 1993 the 180 'profit centres' had been reduced to 59. The net debt of the company was down to £110m by 1993 which left them still paying £12m in interest charges. The cost of this major reorganisation to April 1993 was £34m. In November ‘94 BET reported a 25% increase in pre-tax profits from £46.1m. to £57.7m for the 6 months to October 1st. Business services - comprising cleaning, personnel, security, catering and facilities management - saw sales increase 2% to £370m, although operating profit fell 14% to £11m. 7.3 Employees: By 1995 the total number of BET employees was just over 100,000. Those employed in the UK amount to 77,207. The greatest number are employed in cleaning services with a total of 55,207 fte’s. 7.4 Political Donations: BET despite its own financial problems was a regular donor to the Tory party: 1991 - £20,000, 1992 - £25,000, 1993 - £12,500 7.5 Industrial Relations: BET and its subsidiaries have been one of the more pragmatic companies when it has come to trade union recognition, in contracting out in particular. They have been prepared to recognise trade unions. 7.6 TUPE: Although in the past BET subsidiaries have consistently cut wages and conditions of staff when they have won a contract they had begun to generally adapt to bidding under TUPE regulations. In an Industrial Tribunal regarding TUPE, Initial worked with UNISON to present a joint case against Mediguard, a Rentokil subsidiary, who had won the contract in 1993 from Initial and refuse to accept TUPE. In 1994 Initial, a BET subsidiary, published a small booklet called "Can I afford to ignore TUPE?", written by Prof. Brian Napier. The company offers NHS managers advice on TUPE, and claimed that "the concept of achieving commercial efficiency while remaining sensitive to employee rights is nothing new to us". Initial were one of the first contractors to receive a certificate from the Governments Actuary's Department stating that its pension scheme was broadly similar to the NHS scheme.

PSIRU Capsule

Merged into Rentokil Initial in 1996.

HISTORY:

BET plc is a large multinational company based in the UK, but with operations in Europe and North America. In May 1996 BET was taken over by Rentokil plc to form Rentokil Initial plc. Background to this takeover and to both companies involved is provided in the PSPRU Briefing 14/96 attached to this profile.

BET SUBSIDIARY COMPANIES:

BET is involved in providing a number of services, the main ones being:
* Textile
* Plant
* Cleaning
* Distribution
* Security
* Other services (including Catering and Facilities
Management).

Through its subsidiary companies providing cleaning, security, catering and facilities management BET has more involvement in contracting out/market testing in the UK than any other parent company.

The full name of the firm is Initial Contract Services. Other names or abbreviations used include: Initial; ICS; Initial Healthcare. Initial also operates contracts originally won by firms which were later taken over by BET (mainly in 1985 and 1986). These include: Blue Arrow; Exclusive; ICC; Reckitt; Advance.

The well known Initial towel rental services are carried out by Initial Textile Services. Other BET subsidiaries involved in contracted-out public services working the UK include: Shorrock Guards (security); BET Catering(catering); BET FM (facilities management). BET is also involved in hiring contract labour in various industries: Hestair Management Services (office staff); Hestair Computer Group, Knight Programming Support Ltd (contract computer personnel); Johnson Hire Ltd (contract labour).

BET has cleaning, security, or contract labour subsidiaries around the world:
BET Schoonmaakbedriijven Netherlands
Initial Schoonmaakdiensten Netherlands
Varel Alarmgroep BV Netherlands
Limpiezas Initial Spain
Arcade Building Maintenance Inc USA
Southern Services Inc USA
Talent Tree Personnel Services Inc USA
Nurses Inc USA
Initial Holdings Singapore
Initial Environmental Services Hong Kong
Initial Services Malaysia

In November 1994 BET reported a 25% increase in pre-tax profits from £46.1m. to £57.7m for the 6 months to October 1st. Business services - comprising cleaning, personnel, security, catering and facilities management - saw sales increase 2% to £370m, although operating profit fell 14% to £11m.

SECTORS:

Cleaning Subsidiaries: Initial Cleaning Services, Initial Contract Services, Initial Healthcare, Initial Supplies. Foreign cleaning subsidiaries operate in USA, Netherlands and Spain.

Textiles Subsidiaries: Allied Laundrycraft, Initial Textile Services, Initial UK Ltd.

Security Subsidiaries: Shorrock Ltd, Walport International Ltd, Safeguards.

Other Services Subsidiaries: BET Catering Services Ltd, BET Facilities Management, Hestair Computer Group plc, HMS Personnel Services Ltd.

Other Services (Personnel): Supplying temporary workers. Made an overall loss.

Catering: Expanded in the UK winning further contracts in schools. The catering business showed a profit in its first full year and is the largest commercial contractor to the UK education sector.

Facilities Management: This business was started up in 1992-3 and has won a number of large contracts.

PSPRU Briefing Number 14/96 9 August, 1996

Rentokil’s Takeover Of BET

Briefing 14/96 was originally prepared for the TUC’s multi-nationals project meeting, on the 24 June 1996, by the PSPRU.

Rentokil’s recent takeover of BET makes it one the largest service companies in the world and one of the largest employers in Europe. The £2.1b takeover cost Rentokil £90m and BET some £24m in its defence.

This paper provides an analysis of the takeover and the likely structure that the new company will take and its implications for trade union membership, recognition and European wide representation.

STRUCTURE

Summary

1. Some Immediate Results of the Takeover
2. Rentokil’s Restructuring Strategy
3. Rentokil’s Rejected Operations
4. European Employee Implications
5. The Companies
5.1 Rentokil
6. Sophus Berendsen
7. BET

Summary

Rentokil is committed to integrating the following UK activities of BET; Cleaning, Facilities Management, Catering, Personnel, Security, Textile Services and Distribution. For Europe; Security, Textile Services.

The vast majority of BET’s union membership are in these sections.

Rentokil is committed to developing the Initial service name alongside that of Rentokil. It has renamed BET Catering, Initial Catering, remarking that Rentokil was not a good name for a catering company.

Rentokil will dismantle the Plant, Education & Training and Leisure activities of BET. It has already sold for £2.8m BET's aluminium tower and ladders manufacturing businesses to construction group John Mowlem.

Civil Service unions may have members in the Education & Training division as a result of contracting out. AEEU or other manufacturing unions may have members in the business sold to John Mowlem

Rentokil through its subsidiaries has now become the company with the highest number of contracts, 212, recorded on the PSPRU database. It also has the largest number of NHS contracts.

Rentokil’s overall management structure, and its use of profit centres will more likely determine de-centralised bargaining and localised negotiations. The establishment of a works council could mitigate against this.

The majority of BET’s board, including Baron Tebbit, have been dismissed. The former chief executive has launched a £3m law suit for compensation against Rentokil.

As a result o the merger Rentokil’s parent company, Sophus Berendsen will no longer have a majority share holding. Its ownership percentage has been reduced from 51% to 36%.

1. Some Immediate Results of the Takeover

1.1 Sophus Berendsen: As a result of the takeover the company’s holding of Rentokil will be an unchanged 510.6m 2 pence shares. Rentokil’s capital increase does however, imply that Sophus Berendsen’s ownership of Rentokil will be significantly diluted from the present 51.7% to 36%.

1.2 Rentokil: An extensive review of BET is underway and the Financial Times says it is "focusing in particular on its underperforming cleaning, catering and personnel businesses." BET's large London headquarters will be sold. More will be invested in areas of overlap such as security and textile services.

According to Rentokil’s corporate director, Charles Grimaldi, the company’s review will remain in line with the programme outlined in the company’s final bid document. He also commented that full details would be made available to the public in the company’s next quarterly report, available on the 22 August 1996.

In a recent press statement he said "Rentokil isn't really a good name for a catering company so we will be pulling the catering under the Initial brand...... Initial will operate a second brand alongside Rentokil." This supersedes the brand strategy announced only a week earlier by BET whereby each part off its catering operation had been given a different name. Catering & Hotel Keeper: 1/5/96

1.3 Sell-Off: On 30 April Rentokil began the sell-off of non-core businesses acquired from BET, with a £2.8m sale of BET's aluminium tower and ladders manufacturing businesses to construction group John Mowlem. Rentokil said during the takeover battle that it would review the operations of about 30 per cent of BET's businesses. The City is expecting further sales to help finance the bid. Source: 30 April 96 The Times

1.4 Directors: Rentokil has cleared out much of the BET board following the takeover, Sir Christopher Harding, chairman, and chief executive John Clark led the list of departures. Rentokil confirmed that it remained in dispute with Mr Clark over his redundancy package. Lawyers for John Clark, have issued a writ against Rentokil claiming £3.2m compensation for loss of office after he was dismissed. Source: 17 June 96 Reuter Textline

1.5 Public Sector: In public sector terms, through its subsidiaries it has the largest number of NHS support service contracts, (126) recorded on the PSPRU database. In total it has 212 contracts recorded on the PSPRU database across Central Government, the NHS and Local Authorities in the following services.

Building cleaning, Building management, Catering, Cleaning, Domestic, Facilities management, Hotel, Laundry, Porter, School meals, Secretarial/typing, Security & Telephonists. Its principal subsidiaries are Initial, BET Catering now renamed Initial Catering, Mediguard & Securiguard.

1.6 Industrial Relations: In the public sector there will be a conflict of styles in terms of industrial relations, as BET were more likely to talk and work with trade unions than Rentokil or its main health subsidiary Mediguard.

1.7 Finances: The following table seeks to merge both companies economic performance by sector and geographical region. The BET figures are from the 1993 annual report.

Activity Turnover £m Operating Profits £m
Textiles 249.7 24.9
Cleaning 396.8 20.4
Security 283.3 26.1
Healthcare & Hygiene 255.3 80.2
Other, including
distribution & catering 783.4 45.6
Pest control &
Tropical Plants 300.2 86.7
Plant services 598.2 25.5
Total 2,863.9 309.4
Total Rentokil 860 208
Total BET 2,003 101.4

Region Turnover £m % Of Total

UK 1,405.6 49.07
Europe 561.5 19.60
North America 713.4 24.91
Asia Pacific, Africa,
South America 183.4 6.40
Total 2,863.9 100

2. Rentokil’s Restructuring Strategy

2.1 Rentokil’s Management: Rentokil has been driven to takeover BET by its very ambitious commitment to its shareholders of 20% per year growth in profits and earnings per share.

The company claims its management approach is sharply focused on growth in cash generation, profits and earnings per share. It claims to use the following managerial approach. For industrial relations purposes it is a management style suited to de-centralised collective bargaining. It includes.

* Running all businesses in the same style using similar strict operating and financial systems and controls across all services.

* The operation of a lean organisation based on a branch concept where profit responsibility and accountability is devolved down the organisation as far as possible.

* Relentless monitoring of performance against profit and cash flow budgets and forecasts

* Constant benchmarking, branch against branch, business against business, country against country, to identify and implement best practice

2.2 Restructuring: Rentokil claim that acquisition of BET creates the opportunity for immediate and continuing benefits from:

Management: The rationalisation of BET’s head office and divisional management structure.

This means: The integration into Rentokil’s geographic management structure for BET’s.

UK: Distribution management

Europe: Cleaning management

Activities: The integration of those activities where there is significant direct overlap and where integration will yield immediate and continuing savings.

This means for the UK: Cleaning, Facilities Management, Catering, Personnel, Security, Textile Services

For Europe: Security, Textile Services

2.3 Identification of BET Companies: Based on the above mission statement from the Rentokil bidding document the following list identifies the BET UK companies that fit into the Rentokil plan - under the categories of Sector, BET Company, Business, and Employment and Union where known:

Cleaning - Initial Contract Services - Contract services - 38,471 - UNISON, GMB,TGWU, ISTC

Cleaning - Initial Healthcare Services - Cleaning - 4,500 (4,000 part-time) - UNISON, GMB,TGWU

Catering - Bet Catering - Catering - 10,220 - UNISON, GMB,TGWU

Facilities Management - BET Management Services - Management & Support Services - 608 - CPSA, PTC

Security - Initial, formerly Sentinel Security - Protective services - 104

Shorrock Ltd - Radio & Television Broadcasting and Security Equipment Manufacturers - 899

Textiles - Initial UK - Garment manufacturing - 4,581

Personnel - BET Personnel Services Plc (Parent Company) - Holding Company for employment agencies

Personnel - HMS Personnel - Employment agency - 227 - CPSA, PTC

Personnel - HMS Engineering - Employment agency - AEEU, CWU

Distribution Services - United Transport Tankers - Hauliers - 895 - TGWU & URTU

*Shorrock Guards, sold to Securicor January 1996

2.4 New Structure: The best guess new structure amalgamating both Rentokil and BET companies - using the categories of company, sector, business and employment and union where known:

Initial Contract Services, (incorporating BET Catering) - Cleaning & Catering - Contract services - 48,691 - UNISON, GMB, TGWU, ISTC

Initial Healthcare Services, Mediguard - Cleaning & Maintenance, Catering - 7,783 - UNISON, GMB,TGWU

Rentokil Cleaning Services - Cleaning Services - 6,177

BET Management Services - Facilities Management - Management & Support Services - 608 - CPSA, PTC

Rentokil Facilities Management - Plumbing, Heating & Air Conditioning Contractors - 151

Rentokil Office Machinery Maintenance - Equipment Rental & Leasing - 146

Initial, formerly Sentinel Security - Security - Protective services - 104 - GMB?

Shorrock Ltd - Radio & Television Broadcasting and Security Equipment Manufacturers - 899

Rentokil Security Services - Protective Services - 3,944

Initial UK - Textiles - Garment manufacturing - 4,581

BET Personnel Services Plc (Parent Company) - Personnel - Holding Company for employment agencies

HMS Personnel - Employment agency - 227 - CPSA, PTC

HMS Engineering - Employment agency - Unknown - AEEU CWU

Portman Recruitment - Personnel Services

United Transport Tankers - Distribution Services - Hauliers - 895 - TGWU & URTU

City Link Transport - Transport

City Messenger Company - Messenger Services

Total Employees: 74,206

3. Rentokil’s Rejected Operations

3.1 Rejected Activities: The following section identifies those BET companies that do not fit into the Rentokil strategy and are therefore likely to be surplus to the new organisation.

Sector BET Company Employment Union
Plant Services Bet Plant Services 4,307 Unknown
Education &
Training Unidentified
Leisure Services Unidentified

3.2 Education & Training and Leisure: It has not been possible to identify the BET subsidiaries who perform the Education and Training services that Rentokil are to reject from incorporation. However, BET do have staff training contracts in the Civil Service.

4. European Employee Implications

Given the size of Rentokil’s and BET’s UK and European operations even before the takeover, it is reasonable to assume that the company qualifies for a European Works Council. Therefore a full investigation should be undertaken to ascertain the full geographical and numerical spread of workers across the European Union.

5. The Companies

5.1 Rentokil

5.2 History: Incorporated in 1927 as a Private Company; Re-registered in 1982 as a Public Limited Company. Name changed in 1960 from British Ratin Co Ltd to Rentokil Group PLC. The ultimate holding company was Sophus Berendsen AS (Denmark) but is now majority share holder with 36% of shares issued.

5.3 Activities: The principal activity of the Group is environmental services, including pest control. Other services include healthcare, pest control, security, cleaning, tropical plants, facilities maintenance, medical services, hygiene, hospital services, water and ventilation, communications, personnel services, products and timber preserving, office machine maintenance and property care.

5.4 Employees: In 1995 Rentokil employed 36,858 people (and has added an additional 100,000 with the purchase of BET), and operates in over 60 countries. The company has a low ratio of Administrative and Sales staff overall.

5.6 Organisation: Divided into 5 regional groups: UK, Rest of Europe, USA, Asia and Africa. Each region has its own managing director. The UK has two: Graham Foote and Roger Payne.

Rentokil UK and European Subsidiaries. Each is identified by country, company name, and, where known, sector and employee levels:

UK

Rentokil Ltd, Pest Control, (3, 265)
Rentokil Cleaning Services, Cleaning Services, (6, 177)
Rentokil Facilities Management, Plumbing, Heating & Air Conditioning Contractors, (151)
Rentokil Insurance, Insurance, (8)
Rentokil Office Machinery Maintenance, Equipment Rental & Leasing, (146)
Rentokil Security Services, Protective Services, (3, 944)
Mediguard, Cleaning & Maintenance, Catering, (3, 283)
Portman Recruitment, Personnel Services
City Link Transport, Distribution
City Messenger Company, Distribution

Austria Rentokil Austria Pyt,
Belgium NV Rentokil
GMIC Security
Denmark A/S Rentokil
Finland Oy Rentokil
France Rentokil SA
Germany Rentokil GmbH
Greece Rentokil Hellas
Ireland Rentokil Ltd
Italy Calmic Italia Spa
Netherlands BV Rentokil Services
Norway Rentokil Norge
Portugal Rentokil Portugal Servicos Proteccao & Ambiental Lda
Spain Rentokil SA
Switzerland Rentokil AG

5.8 Finance: 1995 results show turnover up 17.1% on 1994 at £860.1m. Profit before tax £214.5m up 21.2%. UK, turnover grew by 10.9% to £358.5m and profits by 18.7% to £91.3m.

Rentokil’s Financial History
Parent Year Sales £m Profits £m Employees Paybill £m
(000's)

Rentokil 1992 444 108 15,092 147
1993 600 147 22,756 221
1994 734 177 30,830 300
1995 860 214 36,858 366

Rentokil’s 1995 Financial breakdown by sector and Geographical region

Turnover

Pest Healthcare Tropical Security Cleaning Other Total
Control Hygiene Plants
Medical
Services
£m £m £m £m £m £m £m

71.5 83.8 9.8 86.5 29.1 77.8 358.5 (UK)
81.2 87.0 19.8 4.8 2.8 195.6 (Europe)
14.4 5.2 52.9 55.3 36.9 0.2 164.9 (NAmer) 36.9 79.3 13.7 0.5 10.7 141.1 (Asia**)

204.0 255.3 96.2 146.6 66.5 91.5 860.1 (Total)

Pre-Tax-Profit

66.7 80.2 20.2 11.8 5.0 24.3 208.2

** = Pacific and Africa

5.9 Industrial Relations: The company makes no mention of industrial relations structures in its annual report.

5.10 Trade Unions: Mediguard, Rentokil’s healthservice contractor, has not encouraged trade union activities and has in the past cut terms and conditions on NHS contracts.

5.11 Recognition: Mostly refused by Mediguard but some local recognition agreements with UNISON during NHS contracts.

5.12 Directors: C M Thompson: Appointed a director in 1982 and chief executive in 1983. A director of Wellcome plc, Caradon ptc and of Farepak PLC. Held executive appointments in Royal Dutch Shell Group and The Boots Company Ptc. A director of Cadbury Schweppes, Health & Hygiene Division, 1975 to 1982 and managing director from 1978 to 1982.

H E St L King: Solicitor. Appointed a director in 1985 and chairman in May 1994. Chairman Denton Hall, solicitors, and director of City Centre Restaurants and several other companies.

H K Werdelin: Appointed a director in 1983 and vice-chairman in May 1994. Chief executive and a director of Sophus Berendsen A/S. Chairman of the Danish Timber Company A/S. A director of Novo-Norciisk A/S, Th. Wessel & Vett A/S, C W Obel A/S and several other Danish companies.

C T Pearce: Chartered accountant. Appointed finance director in 1987. A non-executive director of The Burton Group PLC. Formerly a director of County NatWest Limited, 1984 to 1987 and of J Henry Schroder Wagg & Co. Limited, 1981 to 1984. Chairman of the Technical Committee of The Hundred Group of Finance Directors.

D G Heywood: Certified accountant. Appointed a director in 1991. Chairman of QS Holdings plc, Nestor-BNA plc and Remploy Limited. Formerly deputy chairman and an executive director of British-American Tobacco Company Limited.

R Koch-Nielsen: Appointed a director in 1993. Senior partner in the Danish law firm of KochNielsen & Gronbtirg. Chairman of Sophus Berendsen A/S and of several other Danish companies.

6. Sophus Berendsen

The company is structured as three wholly owned business sectors and Rentokil. Apart from Rentokil the three sectors cover, Textile Services, Power & Motion Control and Electronics and Data. The three sectors employ 6,600 workers where as 43,500 workers are accounted by Rentokil.

As a result of the takeover the company’s holding of Rentokil will be an unchanged 510.6m 2 pence shares. Rentokil’s capital increase does however, imply that Sophus Berendsen’s ownership of Rentokil will be significantly diluted from the present 51.7% to 36%.

With the ownership reduced to less than 50% Rentokil will no longer be consolidated into the accounts as a subsidiary, but as an associated company. The key figures for 1995 are presented in the following table to show the impact of treating Rentokil as an associated company.

As the table shows the diluted ownership of Rentokil has a significant impact on the presentation of the individual accounts. But Sophus Berendsen claim that with an unchanged share holding, and if the level of Rentokil’s dividend remains the same, they would expect to continue to receive the same aggregate dividend in cash as before the takeover of BET.

Table: Sophus Berendsen’s key figures with Rentokil as subsidiary and associated company.

Item 1995 as reported by 1995 with Rentokil
Sophus Berendsen as associated company
Turnover
(mDKK) 13,766 6,314

Operating
Profit 2,138 317

Average
Number of
Employees 43,500 6,600

7. BET

7.1 History: BET was a large multinational company based in the UK, but with operations in Europe and North America. BET was involved in providing a number of services, the main ones being: Textiles, Plant, Cleaning, Distribution, Security, Other services (including Catering and Facilities Management).

Through its subsidiary companies it provided cleaning, security, catering and facilities management BET had more involvement in contracting out/market testing in the UK than any other UK company.

7.2 Financial Problems: BET's sales and profits looked big enough, but the firm had serious financial problems, because it borrowed a lot of money to buy new subsidiaries, as a result, debts grew too large. This was a major criticism cited by Rentokil in its takeover documents.

In April 1991 a new chief executive team was appointed to urgently address the financial and operational problems. A 3 year turn around programme was embarked upon. This included restructuring in order to establish a flatter management structure and the selling or closing of non-profit making subsidiaries.

Between 1990 and 1991 the pre tax profit fell by just over £100m and even more dramatically in the following year by almost £200m. In 1993 the company made a £9.8m loss with a further major problem facing the company being a debt of £425m.

By 1993 the 180 'profit centres' had been reduced to 59. The net debt of the company was down to £110m by 1993 which left them still paying £12m in interest charges. The cost of this major reorganisation to April 1993 was £34m.

In November ‘94 BET reported a 25% increase in pre-tax profits from £46.1m. to £57.7m for the 6 months to October 1st. Business services - comprising cleaning, personnel, security, catering and facilities management - saw sales increase 2% to £370m, although operating profit fell 14% to £11m.

7.3 Employees: By 1995 the total number of BET employees was just over 100,000. Those employed in the UK amount to 77,207. The greatest number are employed in cleaning services with a total of 55,207 fte’s.

7.4 Political Donations: BET despite its own financial problems was a regular donor to the Tory party: 1991 - £20,000, 1992 - £25,000, 1993 - £12,500

7.5 Industrial Relations: BET and its subsidiaries have been one of the more pragmatic companies when it has come to trade union recognition, in contracting out in particular. They have been prepared to recognise trade unions.

7.6 TUPE: Although in the past BET subsidiaries have consistently cut wages and conditions of staff when they have won a contract they had begun to generally adapt to bidding under TUPE regulations. In an Industrial Tribunal regarding TUPE, Initial worked with UNISON to present a joint case against Mediguard, a Rentokil subsidiary, who had won the contract in 1993 from Initial and refuse to accept TUPE.

In 1994 Initial, a BET subsidiary, published a small booklet called "Can I afford to ignore TUPE?", written by Prof. Brian Napier. The company offers NHS managers advice on TUPE, and claimed that "the concept of achieving commercial efficiency while remaining sensitive to employee rights is nothing new to us". Initial were one of the first contractors to receive a certificate from the Governments Actuary's Department stating that its pension scheme was broadly similar to the NHS scheme.

	PUBLIC SERVICES INTERNATIONAL RESEARCH UNIT @ Business School,

Company Name: BET

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