Parvus Asset Management, the fifth-largest shareholder in British security firm G4S led hostility to the company's £5.2bn deal to buy ISS, slamming it as "an untested vision" that it would not support.
Parvus took ownership on Wednesday of a 3.7 per cent stake in G4S, the world's biggest security company, after swapping out of contracts for difference, the firm's
founder and portfolio manager Edoardo Mercadante told Reuters. The fund began to build its position on 15 April.
According to Thomson Reuters data, the stake would make Parvus the fifth largest investor in G4S ahead of Scottish Widows and Templeton Investment.
A spokesman for G4S confirmed that Parvus had built a stake of at least 3.4 per cent, but declined to comment further.
"The deal does not make sense strategically, operationally or financially and we intend to vote against it," said Mercadante, who said he had spoken to other investors that were also unhappy.
"G4S has only ever done integrated services in Britain, yet it wants to double its size with a facilities management deal abroad. The vision is untested and too risky."
G4S is doubling its equity base in an opportunistic acquisition of facilities management company ISS that will continue its development into an international facilities management company and away from its security services roots.
The company had indicated previously that it would retain its focus on small bolt-on deals in the emerging markets, where it said it wanted to focus 50 per cent of its activities by 2019.
"The deal is to our mind an absurd deal, it is totally unnecessary. People liked G4S for what it was, a business which was easy to understand, a simple business with good growth prospects (and) good profitability," said a second top 20 G4S shareholder, speaking on condition of anonymity.
The company's stock fell 22 per cent after the deal to buy Danish-based support services company ISS was announced on Monday, helped by a $3.2bn rights issue that will dilute existing shareholders.
G4S shareholders will vote on the acquisition and rights issue at a general meeting on November 2.
ISS, owned by Swedish private equity firm EQT and Goldman Sachs Capital Partners since 2005, provides services from cleaning to catering and employs more than half a million workers worldwide.
G4S proposed the acquisition because it says the support services market is increasingly demanding a one-stop shop approach from suppliers that are able to offer a large bundle of services under one contract.
City A.M. Reporter