Top G4S investor says Garda bid too low

Canadian firm offers US$3.7B for U.K. peer

Harris Associates, one of the largest shareholders in G4S PLC, said it values the U.K. security group “significantly higher” than a roughly 2.9 billion-pound (US$3.7-billion) takeover offer from Canadian peer GardaWorld.

G4S is in a “very good spot” financially and operationally, David Herro, a partner at Harris, said in an email. Harris owns nearly 10 per cent of G4S on behalf of its clients, according to Herro. He's the first investor to speak out on the Garda approach and echoes the views of G4S, which has said the offer doesn't reflect the company's prospects for growth.

Montreal-based Garda on Monday appealed to G4S investors to help force management to the negotiating table. An all-cash offer of 190 pence a share would be of “clear and immediate benefit” to shareholders, customers, employees and members of the company's pension schemes, it said.

Herro, who did not say what his valuation of G4S would be, has been an influential figure in the companies in his investment portfolio. In the 1990s, he led the ousting of Maurice and Charles Saatchi from their eponymous advertising agency, Saatchi & Saatchi. Earlier this year he was a staunch, but ultimately frustrated, defender of Tidjane Thiam at the Swiss bank Credit Suisse Group AG.

Garda's proposed deal would be financed by private-equity investor BC Partners, which holds a 51-percent stake in the Canadian firm.

“If there is a debate about value to be had, we hope shareholders will encourage the G4S board to engage constructively with us,” a spokesman for the bidding consortium said.

The latest offer was Garda's third unsolicited approach for G4S and follows an aborted move by the company last year. A combination between Garda and G4S, which provide guards to everything from airports to prisons and have operations around the world, would create a global security firm with more than 600,000 employees.

Garda chief executive Stéphan Crétier is hoping to tempt G4S investors who have seen the company's share price tumble by 17 per cent this year, giving it a market value of 2.8 billion pounds. U.K. fund manager Schroders PLC holds a stake of more than 10 per cent in G4S, according to a Tuesday filing. This makes it the security firm's largest shareholder, data compiled by Bloomberg show.

Andrew Brooke, an analyst at Royal Bank of Canada, said on Tuesday that a price of between 180 pence and 250 pence would be acceptable for G4S shareholders. RBC has raised its price target on G4S, saying Garda's offer effectively puts the company in play.

FEDERICO BERNINI / BLOOMBERG FILES G4S is in a “very good spot” financially and operationally, says David Herro, a partner at Harris Associates who is the first investor to speak out on the Garda takeover approach.