Security firm G4S shareholders have been urged to ignore the latest “wholly inadequate” offer from rival firm GardaWorld, which has been circling G4S for months and made multiple offers for the business.
In a letter to shareholders John Connolly, chairman of the board of directors at the firm, urged recipients to reject GardaWorld’s “wholly inadequate offer”.
He wrote: “We believe that GardaWorld and BC Partners have a clear understanding of the strengths of G4S and recognise that G4S is well positioned to generate substantial free cash flow for you, our shareholders.
“GardaWorld is seeking to use G4S’s strong balance sheet and healthy cash flows to finance their purchase of your company. Furthermore they are capitalising on the impact of Covid-19 on UK equities to make an opportunistic and wholly inadequate Offer.”
The FTSE 250 outsourcer has been the subject of a months-long pursuit by Canadian security firm Gardaworld, which has made multiple offers for the business.
Exchanges between the two companies have become increasingly fractious, with the Canadian firm refusing to give up the pursuit.
Then, US firm Allied Universal joined the race with a higher bid than Gardaworld, raising the prospect of a bidding war for the firm.
G4S has told shareholders to ignore both offers, saying that they “significantly undervalue” the company.
BC Partners took over Gardaworld in 2019. Connolly continued: “GardaWorld would benefit immeasurably from the global scale that G4S would provide and from very significant operational and financial synergies. The offer captures these benefits for BC Partners and GardaWorld, without providing you, the owners of G4S, with fair value.
“Acquiring G4S at a significant discount to fair value would quite simply allow BC Partners and GardaWorld to acquire a global leader in security at your, our shareholders’, expense.”
Dividends to resume
The security firm has performed well in 2020 despite the coronavirus pandemic. According to Connolly, the firm’s underlying earnings for the nine months up to 30 September were ahead of the same period for 2019. As a result the firm plans to resume its dividend from 2021.
A spokesperson from Gardaworld said: “After 39 days, shareholders only merit ‘aspirational’ targets, not forecasts. And now, jam the day after tomorrow. Shareholders should be alarmed that their funds are earmarked to promise an unspecified size and policy on dividends, resuming a year later than G4S’s peers.
“G4S has no future under a senior management team that routinely misses targets, paying unsustainable dividends fuelled by debt and disposals. Ours is a programme of growth and investment in G4S, offering the expertise and energy to solve its problems.
“The simple fact is that any value created in G4S’s shares since June has happened only because of us.”