GardaWorld offer does not reflect growth prospects, says G4S
Security services firm G4S reiterated on Tuesday that Canadian rival GardaWorld’s 190p a share hostile bid for the company was "highly opportunistic", particularly given that it comes at "a critical inflexion point" in the execution of its corporate strategy.
A day after confirming that it had rejected the offer on the basis that it significantly undervalues the company, G4S highlighted its "resilient" performance following the outbreak of the Covid-19 crisis.
"The company is at a very important inflexion point having transformed the business over recent years and it is the board’s view that the underlying fundamentals of the company are very strong," G4S said.
"The GardaWorld proposals are highly opportunistic and do not begin to reflect G4S’s commercial and financial prospects."
Prior to offering 190p a share on 1 September, GardaWorld offered 145p and 153p a share on 15 June and 26 June, respectively.
G4S said the sale of its conventional cash business has strengthened its strategic, commercial and operational focus while providing additional balance sheet strength.
"G4S has significantly reshaped its portfolio over recent years, exiting mature, sub-scale, lower margin and capital intensive businesses, re-deploying investment and focusing on growing its security and technology businesses in addition to extracting significant cost savings," it said.
"G4S has also resolved a significant number of longstanding and material legacy liabilities and onerous contracts and put in place enhanced governance and controls."
The company also said it was increasingly well placed to deliver growth, profitability and substantial free cash flow.
A spokesperson for GardaWorld said: "This is desperately disappointing stuff. The G4S leadership team has presided over a catastrophic loss of faith and reputation and yet they still talk of an ‘attractive brand’ and ‘stakeholder relationships built on trust and a track record of service excellence'.
"After seven years, management’s ‘turnaround’ strategy is still only at ‘an inflexion point.’ What have they been doing all this time? The stark truth is that G4S has missed key targets for five of the last six years. G4S’s shareholders would be better served by their board’s immediate engagement with us."
In a research note on Tuesday, RBC Capital Markets lifted its price target on G4S to 215p from 180p following the GardaWorld approach.
"Whilst the 190p approach from Gardaworld has been rejected, we see the potential for a higher number and/or interest from elsewhere," it said. "With the current price now around our prior 'as-now' sum-of-the-parts valuation, we see downside as limited with risk reward still in favour."
Neil Wilson, chief market analyst at Markets.com, said: "Whilst the 190p offer represents a 31% premium to the undisturbed 145p the stock was trading at before the news broke, this only really recovers pandemic-related depreciation and G4S is probably right to demand a lot more for solid business that generates about £7bn in sales annually.
"Always interesting to see how a company deleveraging (G4S reduced net debt to EBITDA from 3.27x in 2015 to 2.58x today) makes you more appealing to a leveraged buyout, in which GW is a specialist."