G4S nabs Danish rival in £5.2bn deal

The security firm G4S, which provides the nightwatchmen, caterers and cleaners for the Government Communications Headquarters at Cheltenham, is buying its Danish rival ISS in a £5.2bn deal that will create the world's largest integrated security provider with more than one million employees.

ISS's owners – EQT, a Swedish private equity firm backed by the Wallenberg family, and GS Capital Partners, a private equity unit of Goldman Sachs, – will receive £1.52bn in cash and shares for the business, leaving them with an 11 per cent stake in the merged company. They bought ISS for 21.9bn Danish kroner (£2.57bn) in 2005.

G4S, which is taking on £3.7bn debt as part of the deal, said it would fund the giant deal – technically a reverse takeover – with a fully underwritten rights issue. It will offer shareholders seven shares for every six they hold at 122p per share, raising £2bn. It will also refinance existing debt. Reflecting the rights issue, its shares slumped 22 per cent to 219.9p last night. "We believe this acquisition will transform our business, significantly accelerate the delivery of our solutions strategy and create substantial value for shareholders," said the chief executive of G4S, Nick Buckles. For G4S the deal represents greater market share and expansion into new business services overseas to create a firm with more than a million employees in over 130 countries with combined revenues of £15.9bn.

The company aims to cut its overheads by £100m by 2014 at a one-off implementation cost of the same amount. The newly integrated company plans to invest £20m annually in its global operations. A spokesman for G4S said there would be "modest job cuts" in the UK, with 200 people out of a combined staff of 80,000 for the two companies expected to lose their jobs over a three-year integration phase.