Securicor eyes merger after £167m parcel sale

Securicor served notice yesterday that it is on the lookout for a "transforming" deal to turn it into one of the world's top three security companies after disposing of its UK parcel distribution business.

The sale of the group's 50 per cent interest in the joint venture Securicor Omega to the other shareholder Deutsche Post will raise £167m in cash and virtually completes Securicor's return to being a pure security company.

At present Securicor trails Group 4 Falck and Securitas by some margin in a global security market worth an estimated £70bn a year. But Nick Buckles, the chief executive of Securicor, said: "We want to be in the top three and to achieve that will require a transforming deal with one of the other companies in the sector." Chubb, which has a market value of £500m, is roughly the same size as Securicor as is Pittston Brinks and Prosegur.

Securicor is using part of the proceeds of the Deutsche Post deal to pay a £75m special dividend to shareholders worth 12p a share. It is also consolidating its share capital by issuing 17 new shares for every 20 in circulation.

Including the debt being taken on by Deutsche Post, the total value of the deal is £192m. The Germans paid £223m for their initial 50 per cent stake in Securicor Omega in 1999 but since then the profits made by the joint distribution venture have fallen sharply as has the valuations on which these type of companies trade.

Securicor will use £85m of the cash left over after paying the special dividend to pay down existing debt. This will leave the group with pro-forma net debt of £106m and gearing of about 40 per cent. Mr Buckles said this would provide Securicor with enough headroom to expand further in its three specialised areas of cash handling, manned and electronic security and prisons and detention centres.

In particular, Mr Buckles said Securicor was keen to expand its cash handling business in existing markets such as Canada, Germany, China and Hong Kong and enter new markets such as the Netherlands and South Africa. It is also looking at the possibility of entering Australia where it has no presence of any kind.

Securicor has one remaining business to sell – its information systems division which supplies software to fire, police and ambulance services across the UK. Negotiations with an unnamed bidder are at a advanced stage and a deal is expected to be announced next month.

For Deutsche Post, taking full control of the parcel distribution joint venture will strengthen its position in the deregulated UK postal market where the German company already has a licence to start competing with Royal Mail.