G4S in 5.2bn merger
StockMarketWire.com
Security firm G4S has announced a 5.2 billion deal which it says will create the 'world's largest integrated security and facilities services group'.
The company announced the acquisition of ISS A/S for an enterprise value of around 5.2 billion. G4S also announced a 7 for 6 rights issue at 122p to raise approximately 2 billion.
The group put forward the following rationale for the deal saying it would:
* Create a global leader in integrated security and facilities services combining G4S's 2010 revenue of 7,397 million and ISS's 2010 revenue of 8,522 million * Accelerate delivery of G4S's strategy to provide integrated facilities services ("IFS") * Provide significant growth opportunities and an estimated 100 million of annual pre-tax cost savings by 2014 * Lead to an investment of 20 million per year by 2014 in creating service excellence centres to share best practice across the enlarged group * Be a financially compelling transaction expected to deliver, within three years: * double digit post-tax ROIC * double digit EPS accretion * no PBITA margin dilution * Be funded in a manner to allow G4S to retain a BBB (or equivalent) credit rating
It added that: 'The combination of G4S and ISS creates the world's largest integrated security and facilities services company, by revenue, profit, countries of operation and number of employees.'
G4S's chief executive officer, Nick Buckles, said: 'We are excited to announce the acquisition of ISS to create the world's largest integrated security and facilities services group. Since G4S was created in 2004, we have grown our business significantly and have expanded our service offering beyond our traditional security heritage into much broader areas of facilities services and outsourcing to meet growing customer needs. We believe this acquisition will transform our business, significantly accelerate the delivery of our solutions strategy and create substantial value for shareholders.'
'G4S and ISS have very similar cultures and strategic ambitions as well as a strong, shared vision for providing service excellence to customers across the security and facilities services spectrum. The acquisition will also provide significant opportunities for staff at all levels to develop and broaden their skills into complementary areas, as part of a team of more than 1 million G4S employees."
Interim Management Statement.
In the first nine months of 2011 overall revenues grew by 4% at actual exchange
rates compared to the same period last year and by 5% at constant exchange
rates. The group operating margin was slightly lower than the same period in
2010 at both actual and constant exchange rates.
Organic Growth
Overall organic growth was 5%,with 3% in developed markets and 9% in new
markets.
* In secure solutions, organic growth was 5% helped by a continued strong
performance in [UK integrated services] and new markets
* In cash solutions organic growth was 2% overall. New markets grew 10%.
Whilst in developed markets growth was still negative, it improved compared
to the first half of 2011.
Margins
Overall margins were slightly lower compared with the same period last year.
* Secure solutions margins were up slightly, in line with performance in the
first six months of 2011
* Cash solutions margins performed in line with the first six months of 2011
and were down slightly on the same period in 2010
Acquisitions & Divestments
During the first nine months of the year, G4S has invested 38m in deferred
consideration in respect of prior year acquisitions and 38m in capability-
building acquisitions such as surveillance, fraud, intelligence and
investigations services, offender monitoring technology and coin management
services.
Financial position
Our financial position continues to be strong and we remain on track to meet our
cash conversion target of 85% of PBITA for the full year.