Embattled G4S rejects $2.5 billion offer for cash delivery unit

Reuters
A G4S security van is parked outside a bank in Loughborough
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A G4S security van is parked outside a bank in Loughborough, central England, August 28, 2013. REUTERS/Darren Staples

By Brenda Goh

LONDON (Reuters) - G4S, the world's largest security services firm that is fighting to restore its reputation after a series of contract scandals, has rejected a $2.5 billion (1.5 billion pounds) offer for its cash transportation business.

G4S said on Monday that the 1.55 billion pound bid from British private equity group Charterhouse Capital Partners was "highly opportunistic" and undervalued the unit.

The offer comes as the group attempts to salvage its relationship with the British government, one of its biggest clients, after a series of blunders, including its failure to supply enough security guards for the 2012 London Olympic Games.

G4S, which has 620,000 employees in 120 countries providing security services ranging from managing prisons and immigration centres to guarding tennis players at Wimbledon, said cash handling was an important part of its growth strategy.

The unit, which distributes notes and coins for banks and shops using high-security vans, accounted for about 18 percent of the group's 7.3 billion pound turnover last year.

"We think G4S was right to reject the bid, on both valuation and strategic grounds," JP Morgan analysts said.

The analysts said the offer, after taking into account the company's debt, valued the unit at 7.1 times enterprise value to earnings before interest, tax and amortisation, compared to the 2013 valuation of 12.1 times for the whole group.

Britain's government put all of its G4S contracts under review in July after it discovered that it and rival Serco had charged for tagging criminals who were either dead or in prison. Last week, the chief executive of G4S's UK and Ireland business resigned.

Panmure Gordon analyst Mike Allen said cash handling was a stable business that had not produced to its full potential in recent years because of low interest rates.

"At the moment G4S needs a business like that while they're trying to find their feet when there's so much uncertainty with the UK government," he said.

Chief Executive Ashley Almanza, who was promoted from finance chief in June, is expected to unveil a detailed plan for how the company will cut debt and focus on emerging markets next month.

Shares in G4S, which fell to a four-year low of 203 pence after its British government contracts were put under review in July, were trading up 1 percent at 261 pence at 1029 GMT.

($1 = 0.6186 British pounds)

(Reporting by Brenda Goh; Editing by Paul Sandle, Erica Billingham and Giles Elgood)

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