The Swedish security services company Securitas walked away from talks with its British rival Chubb yesterday, just three days after the pair confirmed discussions had begun.
Securitas cooled to the possibility of a tie-up after failing to reach an agreement on price and after investors fretted it would have to issue new equity, City sources said.
The breakdown in talks sent shares in the Swedish company up 7 per cent but left stock in Chubb, which rocketed on Friday after confirming talks were under way, down 29.5p, or 14 per cent, at 180p.
The British company said yesterday that Securitas no longer wanted to continue "preliminary discussions concerning a business combination" and that the talks were off.
In a separate statement, Securitas said that although "obvious synergies" existed between the two businesses, it had not been possible to reach an agreement that was "financially attractive".
Haakan Winberg, the company's chief financial officer, blamed "a combination of things" for the breakdown in talks. "One thing wasn't more important than the other, and the price was only one of the issues. It takes two to tango and we were too far apart."
While City sources said a disagreement on pricing was the major factor behind Securitas' decision to walk away, they believed Friday's fall in the company's share price had also forced a rethink.
"The stock market reacted pretty nervously to the fact that they might have to issue equity and they [Securitas] were, frankly, quite spooked by that," one source said. "The market assumed that if such a deal had gone ahead, they [Securitas] would have had to have issued equity because they wouldn't have been able to finance it through cash."
Shares in the Swedish business, which plunged 7 per cent after the talks were confirmed on Friday, reversed that loss yesterday to finish up 7.3 per cent to 198.5 Swedish kronor.
Analysts said a combination of the two companies, which are thought to have been in talks for just over a week, would have made sound commercial sense.
Securitas, which specialises in providing security guards and handling money, is keen to expand its electronic security operations – an area where Chubb is strong.