G4S, the world’s largest security firm, today rejected a £1.55 billion bid for its cash handling and management division from private equity group Charterhouse.
Speculation gathered pace last week that G4S might sell the distinctive security vans and helmeted guards business for around £1 billion. The firm has remained under pressure over a series of bungled contracts with the UK Government, including its failure to deliver enough staff for last year’s Olympics. That led to the departure of chief executive Nick Buckles in May, with a £1.2 million pay-off.
G4S today said the Charterhouse offer, which it received almost a week ago, was “highly opportunistic”, and that its board “believes the conditional offer fundamentally undervalues the business and its prospects”. It added: “The board considers the group’s cash solutions services to be core to G4S’s operations and strategic plans.”
For once, “opportunistic” has meaning in a bid rejection because new chief executive Ashley Almanza is due to give details of his plans for cost-cutting and minor disposals at an investors’ day a week tomorrow.
Almanza raised £348 million through a share placing in August, and said at the time: “G4S is committed to invest in its core businesses, including cash solutions, which have strong opportunities for sustainable profitable growth. The cash solutions business is integral to G4S’ operations and strategic plans. It is unique in its scale and diversity, with unrivalled emerging markets exposure and strong characteristics.” Cash handling accounted for about 18% of G4S revenues last year, against 72% from security. But analysts pointed out that the two business are closely linked, operating out of the same premises in many places. They also noted that the cash division’s profits should start increasing as interest rates rise.
Along with the Olympics fiasco, G4S has been accused of charging the Government for electronic tagging of non-existent prisoners. Staff at Mangaung prison in South Africa, run by G4S, have today been accused of abusing inmates. G4S says it has seen no evidence of abuse by its employees.
Panmure Gordon analyst Mike Allen said: “These are businesses that private equity loves — decent cash generation, higher returns. It’s quite a stable business really. It has not produced to its full potential in recent years because of interest rates being so low. At the moment, G4S need a business like that while they’re trying to find their feet when there’s so much uncertainty with the UK Government.”
G4S, which gained 10p last week, today rose 2.85p to 261.35p as most analysts backed its rejection of the bid.
