ALEX BRUMMER: Canada plots a security coup with G4S

On the day when the future of British technology jewel ARM Holding is on the line, it is hard to get agitated by a Canadian bid for outsourcing group G4S.

A succession of scandals since the London Olympics in 2012, when G4S came close to undermining a great celebration of the UK, left its reputation in tatters.

As of writing, G4S lives under the shadow of a Serious Fraud Office prosecution over electronic tagging, and questions over its ability to safely manage prisons in spite of recently having been awarded a contract at Wellingborough in Northants.

G4S's would-be owners Garda World have struck at a moment when the security firm looks vulnerable because of the strains placed on all businesses by coronavirus

G4S's would-be owners Garda World have struck at a moment when the security firm looks vulnerable because of the strains placed on all businesses by coronavirus

G4S’s would-be owners Garda World have struck at a moment when the security firm looks vulnerable because of the strains placed on all businesses by coronavirus

As an employer of 500,000 in the UK, Australia and elsewhere, G4S has grown into one of Britain’s, and the world’s, biggest suppliers of security – including keeping new generation carrier, HMS Queen Elizabeth, safe.

Would-be owner Garda World has struck at a moment when G4S looks vulnerable because of the strains placed on all businesses by coronavirus.

At first blush, the offer price of 190p on the table valuing the business at £2.96bn – a premium of 180 per cent when the first approach was made in June – looks good.

But since then G4S has produced decent results and the actual premium has shrunk to a less sexy 31 per cent.

By resisting the embrace, G4S chairman, former Deloitte big cheese John Connolly, and chief executive Ashley Almanza would hope to drive the price up.

Instinctively, one distrusts bids engineered by private equity. As the tide went out in the pandemic, too many former private equity owned enterprises, from Debenhams to Saga and Walgreens Boots Alliance, have shown that a period in ownership behind closed doors can do more harm than good.

The driving force behind the G4S offer is Stephan Cretier, a self-made French-Canadian who has built his enterprise from scratch and is committing to a long-term future in the UK. 

The possibility of a new start for G4S under the leadership of an Anglosphere partner is not unattractive. 

What gives pause is that the deal will be financed by leverage provided by BC Partners. Cretier may be in for the long haul, but private equity regards a couple of years as long term.

There are other considerations too. As we know from the debate about Arm, one of the first things overseas owners tend to look at is headquarters. 

And when HQ goes, so do all the other services, from the local Pret a Manger to IT and accounting. In many cases, there is a loss to HMRC as domicile is moved to a low tax location.

Boris Johnson is promising to take a good look at Arm-Nvidia. If Garda World goes hostile, the Government is going to have a huge say as so many of G4S’s biggest contracts are with HMG, including some at defence establishments. It potentially could have a veto.

But whether there is anyone in Whitehall, let alone the City, ready to go to the mat to save G4S for the taxpayer is a moot point.

Mega-banks

The history of cross-border banking mergers in Europe is not good. So it is not surprising that as bankers seek more scale, to replicate Wall Street giants such as JP Morgan Chase, they are looking closer to home. 

Disclosure that UBS chairman Axel Weber has been eyeing a mega deal with rival Credit Suisse was enough to send a frisson through the markets. 

In the past, the two banks, which have different strengths, reportedly have co-operated by trying to merge back office functions. 

The march of fintech is forcing traditional banks to look at ways of meeting the challenge of payments companies.

In Spain, CaixaBank and Bankia recently revealed that they are exploring a deal to create the country’s largest bank. A combination of wealth management-focused UBS and Credit Suisse would pose regulatory questions but might provide Swiss banking with a means of flexing its muscles.

After the farce of ABN Amro and Lloyds HBOS, I wouldn’t count on a UK super-merger just yet.

OK boomer

Oracle may be in the driving seat to acquire social-media sensation Tik Tok, but it shouldn’t expect to be alone.

Google owner Alphabet is rolling out a video service called ‘Shorts’ through YouTube. 

Users will be able to create short mobile-friendly vertical videos and add special effects and sounds, added from its music library.

Can’t wait.

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