G4S shares plunge after £5.2bn offer

INVESTORS took fright yesterday after security firm G4S revealed plans to buy ISS from its private equity owners in a £5.2bn deal.

Shares in G4S plunged more than a fifth after it said it would pay £1.53bn in an even split of cash and shares for the Danish facilities management group. It will raise £2bn to help fund the deal through a rights issue and take on ISS debt of £3.67bn.

It is only eight months, however, since EQT and Goldman Sachs Capital Partners pulled a £1.55bn float in Copenhagen at the eleventh hour.

Yesterday Nick Buckles, chief executive of G4S, hailed the deal as “game-changing” and said it allows the firm to move into support services.

“We believe this acquisition will transform our business, significantly accelerate the delivery of our solutions strategy and create substantial value for shareholders,” he said.

G4S is already the world’s largest security company and the deal will create a group with revenues of £16bn and 1.2m staff in 130 nations.

The deal sparked concerns, however, about its size and shares in G4S closed down 22.1 per cent at 219.9p. Buckles dismissed the drop as a “technical adjustment” and said the takeover would be “well-received” in the long-run.

Kevin Lapwood from Seymour Pierce said: “Although G4S has in the past proved effective at integrating large acquisitions, this will double the size of the group and there is bound to be some transactional risks in the short term.”

G4S said the new deal would provide an estimated £100m of annual pre-tax cost savings by 2014. The seven-for-six rights issue is priced at 122p a share.

EQT and Goldman, which bought G4S for about $3.8bn (£2.4bn) in 2005, will hold a stake of around 11 per cent.

TIME LINE | G4S

17 October 2011
Chief executive Nick Buckles says around 2,000 staff will lose their jobs as part of the takeover but says there is a “good chance” the firm will create 50,000 jobs every year.

23 August 2011
G4S reports a three per cent rise earnings before interest, tax and amortisation to £239m for the six months to June 30.

31 March 2011
Wins a £750m contract with the Ministry of Justice – the first time control of an existing state-run jail has been handed to private managers. The firm will control Birmingham prison and Featherstone 2, which is being built in Wolverhampton.

21 March 2011
Signs an estimated £100m contract to be the official security services provider for the London Olympics.

29 October 2010
Says it will lose contract with UK Border Agency for escorting detainees on deportation flights

15 October 2010
Says it is in talks with an unnamed police force to operate Britain’s first totally privately run police cells.

13 September 2010
Announces deal to buy Skycom, a market leader in African security systems.

24 February 2007
Securicor and the security business of Danish rival Group 4 Falck agree to merge to form G4S, the world’s largest security firm.

MEET THE ADVISERS

ANTHONY PARSONS, TOBY CLARK

DEUTSCHE BANK

CITY veterans Anthony Parsons and Toby Clark from Deutsche Bank, who advised G4S alongside Greenhill, have acted on a series of major deals.

Parsons, head of UK mergers and acquisitions at Deutsche, returned to the bank in 2005 after a seven year spell at Citigroup.

During his time at Citi he advised private equity house Apax on its £1bn acquisition of Travelex and West LB on the sale of Boullion, its aircraft leasing business.

Clark, a managing director who has spent 12 years at Deutsche Bank, was part of a team which advised on retailer New Look’s £650m flotation early last year. It was later postponed because the timing “wasn’t right” although some investors had criticised the price.

David Wyles of investment bank Greenhill also advised G4S. Deutsche Bank and RBS Hoare Govett acted as joint global co-ordinators and corporate brokers to G4S.

RBS Hoare Govett is the corporate broking arm of the Scottish bank.