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On 9 October 2020, security company, G4S plc, announced that it had received an expression of interest from its US rival, Allied Universal Security Services LLC, regarding a possible offer for G4S.
Allied Universal is a security and facility services company with offices across the US, as well as in the UK, Canada and Mexico. Following a number of mergers over the years, the company has grown in size, its 2016 merger with Universal Services of America cementing its place as the largest security company in North America. Both G4S and Allied Universal are considered to be amongst the top 3 security companies in the world. Allied Universal’s largest backers include pension fund Caisse de Dépôt et Placement du Québec (CDPQ), private equity house, Warburg Pincus, and Brazilian bank, J Safra Group, all of whom invested in the company just last year. Part of CDPQ’s investment also included approximately £300 million primary capital to be used to pursue Allied Universal's growth strategy and to execute their pipeline of attractive M&A opportunities.
The possible offer comes as G4S is defending itself from a hostile offer from Canadian company, GardaWorld Securities, who made a firm offer for the company on 30 September 2020 at 190 pence per share, valuing G4S at £3bn. This offer has not been changed since GardaWorld initially announced its interest in acquiring the company, despite which the board of G4S claiming it significantly undervalues the company and is ‘highly opportunistic’ (See: G4S board on guard from hostile takeover attempt). GardaWorld Chair, CEO and founder, Stéphan Crétier, justified the offer as a ‘full and fair price for an asset which faces turbulent times and difficult operating conditions’, supported by the Chair of BC partners, (owner of GardaWorld) Raymond Svider, who called the turnaround of G4S a ‘hugely demanding task’.
GardaWorld has since announced an engagement programme with key G4S shareholders. In its presentation, GardaWorld highlighted pension liabilities of over £2.7bn, £1.6bn worth of ‘one-off’ charges and five potential lawsuits as evidence that G4S requires new owners. GardaWorld went on to state that the drop in G4S’s share price was of its own doing and not a result of the pandemic and reminded shareholders of the scandal surrounding the FTSE 250 company since its failings at the 2012 Olympics. Responding to this, the G4S board released an announcement, claiming GardaWorld is focusing on ‘legacy issued, which are now substantially resolved’, and calling the Canadian based company ‘loss-making’. The board also claimed that the company should be valued based on ‘the strength of the [its] current position, performance and its future prospects’. In line with this, the board highlighted G4S’s 10% organic revenue growth in 2019 and 6% in the first six months of this year, alongside numerous contract wins, including a £300m contract with the UK government, announced on 6 October 2020.
While no definitive recommendation has been given in relation to Allied Universal’s potential offer, the board of G4S did reiterate within its announcement that shareholders should reject the ‘unattractive and highly opportunistic offer’.
G4S closed at 214 pence per share following the announcement of the competing offer, representing a 13% increase on GardaWorld’s offer of 190 pence per share, and a 6% increase on its share price as of 8 October (being the last day before the announcement).
Market Tracker will continue to monitor this transaction as it develops.
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