Institutional Shareholder Services, a corporate governance adviser to 1,700 large investors, spoke out over the weekend about concerns over the difficulties of integrating the two firms and the level of debt involved in the deal.
“We see risk in terms of increased leverage, integration of a sizeable business in a different sector, and potential loss of focus during the integration period in a business that is competitive and exhibits tight margins. We believe it’s unclear whether the upside in this deal compensates shareholders for the risk they will bear. On the other hand, we see clear upside should shareholders vote down the transaction.”
Shares in G4S plunged 22 per cent after it announced the deal last week and have only recovered a bit since.
Chief executive Nick Buckles faced a further blow when Edoardo Mercadante, the founder of fifth-largest shareholder Parvus, said the asset manager would vote against the deal, which would involve a £2bn rights issue and G4S assuming ISS’ debt of £3.67bn. When asked about Institutional Shareholder Services a spokesman for G4S said: “They have not met the company, they have not heard the strategy and there are factual inaccuracies in their report.”
If the merger between G4S and ISS goes ahead then the group could raise around £250m by selling off the non-core parts of its French arm.