Shares in UK-based pest control firm Rentokil have hit a record high after it agreed a $6.7bn (£5bn) deal to buy US rival Terminix Global.

The stock was 6% up at the market open in London on news of the cash and shares takeover.

It was seen as scaling up Rentokil’s pest control business in North America and boosting its expertise in termite and residential services.

The deal, which has the support of both boards, will see about 643.29 million new Rentokil shares issued to Terminix shareholders and $1.3bn (£984m) in cash.

It implies a value of $55 per Terminix share, representing a 47% premium to Monday’s closing price.

Terminix’s shareholders will own about 26% of the enlarged group, which will have a customer base of almost five million globally, employing about 56,000 people.

Rentokil said it expected the tie-up to generate cost savings of at least $150m by the third year after the close – expected in the second half of next year subject to shareholder and regulatory approval.

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Its chairman, Richard Solomons, and chief executive Andy Ransom will hold the same roles in the combined group.

Mr Ransom said of the agreement: “This is an exciting and transformational combination that will create the global leader in commercial, residential and termite pest control, and a leader in North America, the world’s largest pest control market”.

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