Hostile working environments are commonplace in the security industry. they include the boardroom, judging from gardaworlds offer for uk rival g4s on wednesday. accompanying the hostile bid at a price already rejected by g4s was a barrage of criticism from gardaworld boss and founder stephan crtier. g4s shareholders will agree with many of his points but the assertion of a full and fair price is not one of them.
Depressed uk share values are luring plenty of bids from across the atlantic. the offer from canadian group gardaworld and private equity backer bc partners is particularly opportunistic. outsourcing business are deeply out of favour in the uk after a series of crises.
Gardaworld is offering 190p per share in cash, valuing g4s at just under 3bn. a gardaworld statement laced with promises on pensions and no mention of job guarantees will only get it so far. g4s shares are trading close to 200p. a higher offer is needed before g4s should agree to come quietly.
Some of mr crtiers barbs are well-aimed. before bid rumours in early september, g4s shareholders were nursing losses of about half since the shares peaked in 2017. the companys armoured vans are not its only defensive attributes; organic revenues in the year to august slipped just 2 per cent.
G4ss pension liabilities, which stood at 2.7bn last year, remain a dragging anchor. a funding hole of almost 300m that needs filling will continue to sap earnings. a payment of 50m is needed this year.
Gardaworld points to an 80 per cent price premium compared with g4s shares in june. but the bid only values g4s at 12 times downgraded earnings. that is in line with trading levels over the past five years. mr crtier should apply the same multiple to earnings unadjusted for an unpredictable pandemic. the persuasive price per share would then be closer to 230p.
Hostile, lowball bids rarely work in the uk, no matter how vociferous the bidder.
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