Rentokil Initial, which owns express operator City Link, is buying Target Express for £210 million. So far, it says, it has received acceptances for 90 per cent of the share capital with the balance expected no later than the end of the year.
Target Express has 39 branches with a main hub in Coventry. In the year to 30 April 2006 sales were £146.1 million and operating profit was £17.3 million. City Link had network turnover of £240 million in 2005. The group believes it can save £10m a year through the merger of the operations.
The combined business will handle some 340,000 parcels per day. Operational integration of the businesses will commence in mid-2007 following investment in an integrated IT platform. In the meantime, both businesses will continue to operate as normal.
In October 2005, Rentokil Initial announced its intention to buy back and integrate the City Link franchises and now owns 80 per cent of the network (56 franchises). A further 13 franchises will be repurchased during 2007 to complete the buy back programme.
Rentokil Initial said Target Express and City Link were highly complementary businesses with similar operating models and bringing them together would create a leading overnight parcels operator able to meet the increased demands of current and prospective customers in a dynamic marketplace.
“The integrated business will provide a wider range of services including same day deliveries, overseas deliveries, international mail and fulfilment. Customer handling processes including track and trace will also be enhanced.”
Doug Flynn, chief executive officer of Rentokil Initial, said: “In the past year, we have made great progress along the path of transforming City Link into a fully integrated parcels delivery service through the buy back of the franchise businesses; today’s announcement is a logical next step in the development of the business.”