(Sharecast News) - G4S issued a further plea to shareholders to reject the unsolicited offer for the company from privately-held Canadian firm GardaWorld on Thursday, reiterating that it believed the 190p-per-share offer "significantly undervalues" G4S, describing it as "nowhere near a full and fair price".
The FTSE 250 company said that, when GardaWorld and BC Partners first approached G4S in June, UK equity prices were already severely depressed by the global pandemic, making GardaWorld's timing "highly opportunistic".
Chairman John Connolly said that, since then, the broader UK market had traded at its greatest valuation discount to global equities for 20 years.
In contrast, BC Partners - now the majority shareholder of GardaWorld - paid a multiple of 11.2x last 12 months EBITDA for its acquisition of GardaWorld in 2019, with Connolly noting that the offer for G4S was "very significantly below" that value at 7.7x last 12 months EBITDA.
In addition, he said the 190p per share offer also failed to provide G4S shareholders with fair value for the "significant operating synergies" available to GardaWorld across overlapping geographies and the combined cost base of £8.7bn.
It also failed to reward shareholders for the "very substantial financing synergies" that would accrue to GardaWorld by gaining access to G4S's balance sheet and "robust" cash flows, Connolly said.
"BC Partners' acquisition valued GardaWorld at CAD 5.2bn, and BC Partners now has a controlling interest in a business that has been heavily loss-making, and lacks financial strength," John Connolly said in his letter to shareholders.
"GardaWorld and BC Partners desperately need access to G4S's balance sheet and strong cash flows in order to finance this acquisition, and their acquisition-fuelled growth strategy.
"Meeting their needs should not be at the expense of our shareholders and key stakeholders."
Connolly also said GardaWorld "lacks global scale and coverage", adding that acquiring G4S at a discount to fair value would allow them to own a clear global leader in security at the expense of shareholders.
"GardaWorld has quite simply failed to articulate why your company's employees and stakeholders should support an acquisition that would be over 10 times the size of GardaWorld's largest acquisition to date.
"Furthermore, in all of its communications GardaWorld has been conspicuously non-committal about the future of G4S's non-UK employees, which represent around 95% of our workforce."
Connolly said the board believed G4S had "a bright future" as an independent company, underpinned by its position as "a global leader" in security, clear financial targets, "resilient" trading performance this year, as well as its re-rating potential, now the business was refocused.
"Your board ... believes that GardaWorld's offer significantly undervalues G4S.
"In providing their financial advice to the board, the financial advisers have taken into account the board's commercial assessments."
John Connolly noted that Citi was providing independent financial advice to the board, for the purposes of rule 3 of the City Code.
"Accordingly, the board unanimously recommends that you reject the offer.
"Your directors will not be accepting GardaWorld's offer in respect of their own beneficial shareholdings."
At 0908 GMT, shares in G4S were up 0.12% at 205.75p.
18 Sep 2020 09:45
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