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G4S agrees to buy ISS for $2.4b

G4S CEO Nick Buckles said the deal enables the company to gain access to the facilities cleaning market. G4S CEO Nick Buckles said the deal enables the company to gain access to the facilities cleaning market.
Bloomberg News / October 18, 2011

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LONDON - G4S PLC agreed to acquire ISS A/S for $2.4 billion to create the world’s biggest integrated security provider and office cleaner for clients such as Citigroup Inc.

G4S plunged as much as 22 percent, the most since it started trading on the London Stock Exchange in 2004, after saying in a statement that it plans a $1.46 billion rights offer to fund the purchase.

G4S is buying ISS from EQT Partners and Goldman Sachs Capital Partners for a total value of $3.79 billion, of which $2.69 billion is assumed debt, chief executive Nick Buckles said on a call yesterday.

G4S is playing into a trend for customers to bundle different kinds of office upkeep and security services into a single contract. With the purchase, the Crawley, England-based company gains access to the $364 billion facilities management market, where the ability to offer other services alongside security can boost expansion by 1 percent to 2 percent, Buckles said.

“G4S has a good track record on acquisitions and the move to an integrated facilities services offering does have some logic,’’ Robert Plant, an analyst at JPMorgan Chase & Co. with a “neutral’’ recommendation on the company, wrote in a note.

G4S expects an earnings-per-share boost of at least 10 percent from the deal, Buckles said. Combining the businesses could result in a “couple of thousand’’ job cuts, he said.

The transaction will create a global services provider with $11.65 billion in sales, generate $72.81 billion in annual cost savings by 2014 and drive growth in emerging markets, G4S said.

The price the UK company will pay is equal to 8.5 times ISS’s earnings, according to the statement.