Rentokil Initial, the world’s biggest pest control company, has a target on its back. The stock has become the sixth most shorted in London, with short positions at 5.6 per cent of its outstanding share capital, from zero at the start of this year.
Why? It is related to the FTSE 100 constituent’s $6.7 billion cash-and-shares purchase of American rival Terminix, which is on course to complete this year. Hedge funds have tried to profit on uncertainty over whether the deal will complete, taking short positions in Rentokil and betting that Terminix will rise. These funds make money as the spread between the two share prices closes because a deal becomes more likely to go through.
The shares now trade at 28 times forward earnings,
