G4S forced to withdraw £5.2bn ISS takeover bid

Shareholders revolt over concerns about price, funding and integration risks

The vainglorious attempt by G4S to provide everything from security guards to office cleaners through a £5.2 billion takeover of Danish services group ISS finally collapsed yesterday as a last-ditch bid to garner shareholder backing failed.

The deal had come under fire from big institutions such as Schroders, the Co-op and Artemis, which had voiced a variety of concerns about the transaction including over the price, funding and the integration risks posed by such a transformational deal. Its failure will still cost G4S £50 million in terms of fees and the cost of derivatives to cover against the risk of currency movements as a result of taking over a Danish company.

While a number of leading shareholders had been contacted by the group before the merger was announced, it started to flounder as mid-level investors increasingly raised objections. And earlier this week Harris Associates, the second biggest shareholder with 5 per cent, said it would vote against. G4S shares had fallen by a fifth since the announcement.

G4S, which has had experience of big deals having been created from the merger of Group 4 and Securicor, had planned to pay for ISS with a deeply discounted £2bn rights issue and £3.7bn of borrowings. However, the borrowings in particular spooked shareholders given the fear stalking the markets as a result of the European debt crisis, with many companies seeking to reduce gearing. They were also concerned at G4S moving into areas such as cleaning and catering, which are specialisms of ISS.

It is the second time in just over a year that a FTSE 100 company has attempted a transformative deal only to have its ambitions dashed by a shareholder backlash, with Prudential pulling its bid to buy Asian insurer AIA for £25bn in 2010.

G4S chief executive, Nick Buckles, said: "We respect the importance of shareholders' views and, on the basis of feedback received since the transaction was announced, we have decided not to proceed."

He and the chairman, Alf Duch-Pederson, had been conducting a furious lobbying campaign in recent days to get the deal back on track. However, Mr Duch-Pederson said: "We consulted our leading shareholders ahead of announcing the transaction and, based on the feedback received, felt confident to launch the deal.

"We have now discussed the merits of this combination with a significantly larger number of our shareholders ... 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."

G4S was advised on the deal by Deutsche Bank and Greenhill. Goldman Sachs and Morgan Stanley advised ISS, which is owned by Goldman Sachs Capital Partners and Swedish private equity firm EQT Partners.

Shareholders are starting to get serious

With the second multibillion pound takeover blocked by shareholders in 13 months, companies – and their boards – have been put on notice. They can no longer expect to listen to the siren-calls of investment bankers and expect shareholders to simply wave through the deals dreamed up as a result. Shareholders appear to be heeding calls to take "stewardship" of the companies they own seriously.

Nonetheless Nick Buckles, above, chief executive of G4S, will almost certainly live to fight another day following the collapse of his £5.2bn bid to takeover Danish support services group ISS. His chairman Alf Duch-Pedersen, right, may find the going tougher.

As was the case with Prudential following its failed attempt to buy the Asian insurer AIA in 2010, much of the criticism is being directed at the chairman. Mr Duch-Pedersen will take heart from the fact that Harvey McGrath, the chairman of Prudential, refused to fall on his sword. But Prudential was helped by its influence in the City, and Mr Duch-Pederson will now have to spend some time smoothing some ruffled feathers if he is to repeat Mr McGrath's trick.

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
Sport
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
PROMOTED VIDEO
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
people
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Sport
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
sport
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little