The Canadian security group behind a hostile bid for G4S has stepped up its campaign against the company’s management, pointing to five “potentially crippling” lawsuits as evidence that it requires new owners.
On Tuesday Montreal-based GardaWorld, backed by the private equity company BC Partners, started meeting G4S shareholders in a bid to persuade them to force its board to accept a 190p a share offer.
As part of its argument it alleged that there were five key legal cases being brought against the company and it was unclear “how such potential liabilities will be met”.
It criticised G4S for not reinstating its dividend and said shareholders should be seriously concerned about its pension liabilities.
“We have said before that the business needs a new owner, not a face-saving change of management or a shake-up of the board,” Stephan Crétier, founder and chief executive of GardaWorld, said in a statement. “That will not produce the root and branch change to the company’s operating practices that is so urgently needed.”
GardaWorld, in which BC Partners has a 51 per cent stake, launched a formal hostile takeover bid in September. It is rare for companies backed by buyout groups to support hostile takeovers.
The Canadian group’s founder and chief executive Mr Crétier has been increasingly vocal in recent weeks in his effort to win over G4S shareholders, including a slot on BBC Radio 4’s Today programme last week in which he said the company was “deeply troubled”.
The lawsuits include a class action case filed by Allianz Global Investors and other shareholders for losses arising from alleged misleading statements on electronic tagging work for the UK Ministry of Justice, which has resulted in a significant settlement with the Serious Fraud Office.
Another related to US personnel injured or killed in Afghanistan. It alleges that G4S provided support to the Taliban in Afghanistan.
Additionally, there were two cases relating to employment rights — one a class action litigation accusing G4S of performing employment-related background checks across the US without complying with federal laws that regulate the collection of consumers’ credit information and access to their reports.
There is also a new class action for its alleged violation of labour laws, the latest of which was filed in California in August.
GardaWorld said the potential impacts are “difficult to quantify given poor company disclosure”. The Canadian security business said “one-off’ and restructuring charges had totalled £1.6bn since 2013, or more than £200m a year, and had increased in the past two years.
G4S said the group had “fully and transparently disclosed all of these matters to shareholders already” and that this amounted to “nothing more than scaremongering by GardaWorld”.
It added that there were no issues with its pension fund, which had assets of £2.4bn at the end of 2019, and an agreed funding plan with trustees.
The £3bn bid has been repeatedly rejected by G4S’s management in recent months, and many shareholders are holding out for a higher price. G4S shares are trading at 202p, higher than the 190p offer.
Fund manager Schroders, the biggest shareholder in G4S with a 10.4 per cent stake, has already said it is open to a deal, but only at a “fair price”.
G4S has 530,000 staff and turnover of about £7.8bn versus just £2.1bn and staff of 102,000 at GardaWorld.
G4S added: “It is obvious, just by comparing our business in the US, the world’s largest security market, with GardaWorld that G4S is superior in scale, capability (including technology) and performance.”
The announcement came as G4S confirmed it had won a 10-year contract to run Wellingborough prison in Northamptonshire, suggesting that its relationship with the UK government had improved after a series of scandals starting with its failure to provide enough security guards at the London 2012 Olympic Games.
Get alerts on G4S PLC when a new story is published