G4S Turndown the £3bn Acquisition Offer Made by GardaWorld

  • Sep 16, 2020 BST
  • Team Kalkine
G4S Turndown the £3bn Acquisition Offer Made by GardaWorld

Summary

  • G4S, the security firm of the United Kingdom, had been offered a £3bn ($3.8 billion) hostile takeover bid from its Canadian rival GardaWorld
  • GardaWorld had offered to pay 190 pence a share in cash for taking over G4S
  • The board of G4S showing solidarity rejected the proposal that it belittles the company and its prospects

G4S, the security firm of the United Kingdom, had been offered a £3 billion ($3.8 billion) hostile takeover bid from its Canadian rival GardaWorld, which was ultimately rejected by the company, on the ground that it was it belittles the company and its prospects considerably and is not in the best interests of shareholders or other investors.

What Was the Deal All About?

GardaWorld (GW) offered to pay 190 pence a share in cash for taking over G4S in order to create the world’s leading security service provider. GW had also made three attempts previously to engage with the G4S board over the past three months (between June and August), but the same had been summarily dismissed or ignored on all three occasions. G4S said it had received earlier proposals at 145 pence a share and 153 pence a share in June.

What Has Been the After-Effect of The Offer?

This had a massive impact on the London-listed firm, gaining in the stock market. After G4S confirmed the move, its stocks have been surging. The shares of G4S were traded up by nearly 25 per cent, and on 15 September 2020 were spotted at GBX 181.00 at market close. 

(Source: Refinitiv, Thomson Reuters)

Company’s (G4S) Take on the offer

G4S issued a statement on 14 September making it clear that the board of the company, after following careful consideration, along with its financial advisers, unanimously rejected the new proposal on 12 September 2020. The reason stated for not accepting the offer was that it significantly undervalued the company and its prospects. The board of the company also stated that it was of the view that the timing of the offer was highly devious, which came at a time of serious turbulence in global financial markets.

The company’s financial performance can be called resilient, following the outbreak of Covid-19, as evident from the company’s interim results for the six months ended 30 June 2020, which was released on 23 July 2020. Shareholders were firmly cautioned not to take any action in relation to the new proposal from the Garda World.

The company stated that the Canadian business, GardaWorld has been encouraging the shareholders of G4S consequently, to mandate their board’s engagement in collaborative discussions towards a transaction that would be of clear and instant benefit to G4S’s shareholders, employees, members of the company’s pension schemes as well as to the customers.

G4S is a security specialised company, providing security solutions over a wide variety of segments including Government, oil and gas, transport and logistics, ports and airports, etc. It carries out operations in regions such as Africa, Latin America, Ireland, and the United Kingdom, offering manned security and facilities management services and cash solutions. G4S has approximately 533,000 employees across 85 countries, with its biggest business in North America.

Financial Highlights of G4S

The coronavirus pandemic had an adverse effect on the revenues of the company (£3.1 billion), taking a toll on the European and Middle East markets under UK cash solution business (£0.22 billion). According to the half-yearly result released by the company for the period ending 30 June 2020, the overall underlying revenue was recorded as £3.35 billion (HI 2019: £3.40 billion). The company witnessed a decrease in the overall adjusted PBITA to £187 million (H1 2019: £196 million). There was no change in the underlying EPS of 6.3 pence per share.

Improvement was reported in the financial position of the Group by the sale of conventional cash businesses, which is now 76 per cent complete. The same resulted in an increase in the underlying operating cash flow to £364 million (HI 2019: £164 million). The company recorded the cash business disposal proceeds of £522 million and gain on sale of £171 million on 30 June 2020.

What are the Views of GardaWorld?

According to the founder, chairman, President and CEO of GardaWorld (GW), Stephan Crétier, G4S is in need of an owner, not a manager. GW has been in the sector for the last 25 years and knows how to improve and repurpose G4S’ business. The company believes that the combined business's operations would be a better offer for the business’ future and its dependents. GW could contribute towards turning G4S around, ensuring it delivers for its customers, its people and the public.

To create the world's leading security services business, the combination of GardaWorld and G4S had been an important part of its strategy. If the takeover turned out to be successful, GW’S commitment to the UK would be for the long-term. 

GardaWorld is the largest privately owned security services and cash handling firm in the world, which was established for more than 25 years ago. The company accounts for more than 102,000 employees globally, operating over 450 offices across 45 countries.

GW is having a number of contracts with the UK’s Foreign, Commonwealth and Development Office, and provides security at the British embassies in Afghanistan, Libya, Iraq, Egypt, Malawi, Somalia, Rwanda, Zambia and Tanzania. It is also a well-known provider of security for licensed cannabis producers in Canada.

Conclusion

The pandemic had made the valuation of G4S more appealing, and as per market experts, it could see more bids of the same nature in the near future. Though the company has accelerated its transition to a focused, global leader, delivering integrated security solutions. Its strategic, commercial and operational focus has strengthened with the sale of the conventional cash business, which had added strength to the balance sheet. The management’s trust in the growth prospects and clear strategic priorities of the company can let the investors think again, who are being lured to ask the company to engage constructively with GardaWorld.

 


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