GFS.L Share News (GFS)

(Sharecast News) - G4S has begun the process to spin off its cash logisitcs business, which it thinks could crease "substantial" value for shareholders.A review by directors of different separation options should be completed some time next year, with an update to be provided alongside full year results in March.The FTSE 250 in January 2018 put in place a new organisation structure, creating the Cash Solutions division and consolidating the Secure Solutions businesses into four regions.Cash Solutions operates in 45 countries, with the retail business providing cash payment software and services, transporting, processing, recycling, securely storing and otherwise managing cash for retailers and banks. It is the market leader or number two in 40 of its markets.The board said they believe a separation "has the clear potential to enhance the focus and success of both businesses and thus to unlock substantial shareholder value".Chief executive Ashley Almanza said the new organisation structure "enables us to consider this separation in order to enhance the strategic, commercial and operational focus" of the two main parts of the group.He said: "The review of our separation options offers an exciting opportunity to enhance our focus for the benefit of customers, shareholders and employees. Our aim is to establish two strong, independent businesses that are able to take advantage of their leading market positions and excellent service offerings to deliver sustainable, profitable growth."REACTION & ANALYSISG4S shares gained more than 6% to 195.8p on Thursday.Analysts at Stifel were positive about the potential for shareholder value to be created and lead to a clearer investment proposition."The two businesses have a very distinct proposition with few synergies from having them under the same roof. A separation would we believe allow better management focus and create two global leaders in their own right. It is clear that four years into its turnaround, investors have been losing patience with G4S," the analysts said."Frustratingly, the good progress in Cash Solutions was being obfuscated by legacy issues as well as poor communication along the way."Those at Kepler thought it was "great news" that should highlight "the bargain nature of G4S share price" and "prospects for a significant acceleration of earnings momentum" in coming years. For Kepler, the shares trading for around seven times underlying earnings compares well with rivals with Prosegur Cash on 8.4x and Securitas on 10.5x and Loomis at 6.5x, while Brinks and Wendel paid 12x EBITDA for comparable assets recently.G4S is "75% Securitas and 25% Loomis", meaning 9.7x is more appropriate, hence Kepler has a target price of 300p.The company may use "any" gains from the spin-off to be offset by tax carry-forwards due to G4S' significant tax losses, said Citigroup, while G4S has pledged a share of any "material" disposal proceeds to the UK pension scheme, in the same proportion as the pension deficit bears to overall group indebtedness."We believe this means that G4S will pay 15-20% of any material proceeds into its UK pension scheme, but we note that its triennial review should probably complete next year, which may affect this calculation."