Shareholder opposition kills G4S/ISS deal

AP News
Posted: Nov 01, 2011 5:12 AM
Shareholder opposition kills G4S/ISS deal

British security company G4S said Tuesday it has dropped plans to take over Danish cleaning firm ISS A/S because of opposition by shareholders.

The cash and shares bid from G4S had valued ISS A/S at 5.2 billion pounds ($8.3 billion).

"Following the announcement of the acquisition, shareholders have raised concerns particularly over its scale and perceived complexity against the backdrop of current macro-economic uncertainty," G4S said in an announcement to the London Stock Exchange.

"The board has listened carefully to concerns raised by shareholders regarding the acquisition and has concluded that in the circumstances it is inappropriate to proceed," the company said.

G4S is also canceling a planned rights issue which was to part of the financing for the deal.

G4S had said the combined company would be the world's largest security and facilities group, merging two firms with combined annual revenues of 15.9 billion pounds last year. ISS is the larger company, with revenue of 8.5 billion pounds.

The market immediately reacted negatively to the deal, with the share price falling from 282 pence to 219 pence on Oct. 17, the day of the announcement.

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G4S shares were up 3.6 percent at 253 pence in early trading Tuesday on the London Stock Exchange.

G4S, based in Crawley, England, said there were no break fees to be paid, but it expected to incur costs of about 50 million pounds associated with the bid.

Mike Allen, analyst at Panmure Gordon & Co., applauded the G4S reversal.

"Our concerns on the deal were based on the quality of future earnings and execution risk, with the focus now likely to be on organic growth and bolt-on acquisitions," Allen said.