G4S shares dive as Garda backs out of takeover

G4S shares tumbled more than 8% today after Canada’s Garda World walked away from a possible bid for the security giant.

In April Garda was forced into admitting it was pondering a bid after the Standard revealed its intentions — sending shares rocketing 20%.

It wasn’t clear then whether Garda was looking at an offer for all or just part of the company, which has been plagued by controversy. G4S has earned a reputation for losing prisoners on the way to court and this year reported a 63% drop in profits, leaving it potentially vulnerable to a bid.

This weekend Garda said it had decided against a deal. G4S in turn said it had received no proposal from Garda and would continue its review of the cash solutions business, which moves money to and from banks, shops and cash machines. Selling that would leave it free to concentrate on its security arm.

G4S shares fell more than 8% initially, but recovered somewhat later to be down 4% or 8p at 208p. That leaves the company valued at £3.25 billion.

G4S is the world’s largest security business with sales of more than £7 billion and 550,000 staff across the globe.

Garda is smaller, with sales of just £1.5 billion, which had always made some analysts sceptical about the chance of a bid being successful. Under City takeover rules, Garda cannot make a bid for G4S for another six months.

Following Garda’s retreat, G4S could look to spin off the cash solutions business into its own listed entity, or else seek a sale to a different bidder. City analysts think it would be worth around £1.5 billion.

G4S said it has made “good progress” in its review of the division with “additional expressions of interest”. Despite today’s share fall UBS analyst Bilal Aziz said: “We believe a fluid situation with the break-up and ongoing buyer interest should limit downside.”

Garda is based in Montreal and was founded by Stéphan Crétier in 1995, who remains the CEO. He started the company with an investment of just £20,000.