G4S investor thinks offer by Garda is too low: sources

Sachem Head Capital Management believes GardaWorld's 2.9 billion-pound (US$3.7 billion) takeover offer for G4S Plc undervalues the company, according to people familiar with the matter.

The New York-based hedge fund, one of G4S's largest holders with a 5.74-per-cent stake, is not opposed to a sale of the company at a higher price, the people said, adding that similar transactions in the sector have traded at higher multiples. It is unclear at what price Sachem Head would support a sale.

The firm also believes G4S, which provides guards to everything from airports to prisons, has not been as negatively impacted by the outbreak of the coronavirus pandemic as the stock price currently reflects, the people said, asking not to be identified because the matter is private. While its European business, which skews toward airports, events and tourism, has seen its operations affected, the U.S. arm has been more resilient, they said.

A representative for Sachem Head declined to comment.

“We look forward to speaking to shareholders at the appropriate moment and sharing our thoughts about the difficulties and challenges G4S is facing,” a representative for GardaWorld said in a statement.

Sachem Head isn't alone in its views. Harris Associates, another one of G4S's largest holders, said earlier this week it believes the company is worth more than the current offer.

Montreal-based GardaWorld 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 at the time.

G4S has rejected the offer, which it described as “highly opportunistic” and undervaluing the company.

Canaccord Genuity Group Inc. also called the offer “opportunistic and very cheeky” in a note to clients this week, arguing if Garda and its private equity backer, BC Partners, were not going to “engage sensibly, we think they should stop distracting management after this third lowball bid.”

Garda's latest offer was its third unsolicited approach for G4S since June 26, and follows an aborted move by the Canadian company last year.