G4S Take over the running of HMP Birmingham...BIRMINGHAM, UNITED KINGDOM - OCTOBER 01 2011: As Group 4 Security (G4S) take over the running of HMP Birmingham/Winson Green Prison, workmen fix a 'G4S Welcome to HMP Birmingham' sign to the front of the prison. (Photo by Nick Wilkinson/Newsteam)
G4S has been hit by scandals and profit warnings and the removal of a contract to run a prison in Birmingham © Nick Wilkinson/Newsteam

The security company G4S has become a takeover target after rival GardaWorld confirmed it was thinking of making an offer for the company, sending shares in the world’s biggest publicly listed provider of security services sharply higher.

GardaWorld, a privately owned security company with headquarters in Montreal, said it was “in the preliminary stages of considering an approach to the board” of FTSE listed G4S regarding a possible cash offer for some or all of the business.

G4S shares rose 20 per cent to 221p on the news.

G4S urged shareholders not to take any action. “There can be no certainty that any firm offer for the company will be made by GardaWorld nor as to the terms on which any offer might be made,” it said.

Garda, which employs 63,000 people worldwide with revenues of £1.7bn, has until May 8 to announce a firm intention to make an offer under the UK takeover code.

G4S, which employs 570,000 staff with revenues of £7.5bn, has been struggling to rebuild itself after a series of scandals and profit warnings going as far back as 2012 when it failed to provide enough guards for the London Olympic Games.

Last week the British government said it would permanently take over the running of a prison in Birmingham, central England, from G4S after inspectors found it had turned into a “war zone”.

A merger between the two companies would create a global security giant, with revenues of £9bn a year, providing security guards and cash transportation to ATMs as well as screening passengers at airports.

But analysts at US investment bank Jefferies said the purchase by GardaWorld “would be a stretch given the relative scale of the two businesses and their respective leverage”.

Instead they pointed to G4S’s statement in March that it had received interest from potential bidders for its cash solutions business, which involves the collection, handling and transportation of money in armoured vans.

“Our central case is that is a strategic attempt by Garda to force the transaction timeline and establish sufficient credibility to gain G4S’s full attention,” Kean Marden, analyst at Jefferies, said in a note. “Or perhaps the group intends to buy G4S and auction off the cash [division] . . . or sell other piecemeal assets, and retain the rest?”

Last month G4S reported a 63 per cent drop in full-year pre-tax profits after it was forced to compensate thousands of employees for lost meal and rest breaks.

GardaWorld is partially owned by its management and the New York private equity group Rhône Capital.

The group operates in North America, which accounts for 90 per cent of revenues, as well as the UK, Belgium and several African countries.

It has pursued an ambitious acquisition strategy including the $110m purchase of G4S Canada Cash Solutions in 2014.

Get alerts on UK companies when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article