ALEX BRUMMER: Almost everyone is a loser from battle for G4S – pledges made in heat of takeovers have a nasty record of vanishing in a puff of smoke
Almost everyone is a loser from the bitterly-fought battle for control of UK-quoted security group G4S.
If investors approve the £3.8billion offer from private equity-backed Allied Universal, then command and control of the world’s largest security company, employing 530,000 people, would pass to the Pennsylvania firm.
G4S is not a much-loved company. Well-documented staffing and training difficulties were the nearest the London Olympics in 2012 came to meltdown.
Under the microscope: G4S has been involved in a series of scandals ranging from losing the Birmingham prison contract to scandalous overbilling for electronic tagging
It has been involved in a series of scandals ranging from losing the Birmingham prison contract, after violent eruptions, to scandalous overbilling for electronic tagging.
It can hardly be regarded as a good corporate citizen.
Nevertheless, G4S has a critical role in running prisons, guarding nuclear facilities and helping to keep UK embassies safe.
Any notion that these jobs will be performed more efficiently when run by a US company financed by equity backer Warburg Pincus and Canadian pension fund Caisse de Depot et Placement du Quebec is risible. Private equity is about extracting the maximum amount of income in the shortest period of time. This highly indebted model failed disastrously at Debenhams and more recently at Cobham, where the aerospace enterprise is being dismantled and sold off.
Publicly-quoted Melrose, which operates a private equity model, is facing Parliamentary scrutiny over its decision to close GKN Automotive in Birmingham at the cost of 519 jobs and the loss of a components supplier to Jaguar Land Rover and Nissan.
G4S chief executive Ashley Almanza, aided and abetted by chairman John Connolly, no doubt, think that they have done a bang-up job in facing down a hostile bidder in Canada’s Garda World and soliciting a better offer from Allied Universal. Certainly, the Canadian bidder Stephan Cretier proved to be a walking-talking gaffe merchant with musings on teaching UK shareholders a lesson. In defeat he made claims about being denied access to due diligence.
As former City Minister Paul Myners noted in a recent letter to the FT in a year when Blackrock et al are shouting environmental, social and governance (ESG) investing, the fate of more than half-a-million workers was to have been decided by an auction. What makes the outcome even more egregious was the phony show of resistance with outgoing Almanza set to collect up to £15m if his long-term options pay out.
The 245p price-per-share obtained for G4S appears a generous premium. But like so many UK-quoted shares, G4S has been undervalued, and if the London discount is eradicated, Allied Universal is picking up a bargain. Britain is meant to be comforted by loose promises that UK and international operations will still be run from here. Pledges made in the heat of takeovers have a nasty record of vanishing in a puff of smoke.
While on the subject of ESG greenwash, there is scarcely a better example of an executive who betrayed such principles than former chief executive of Rio Tinto Jean-Sebastien Jacques. He stepped down after the Anglo-Australian mining group destroyed the sacred Juukan Gorge rock shelters in Western Australia in its search for iron ore, much to the horror of the country’s First Nation groups.
Jacques is described by Rio as an ‘eligible leaver’ and picks up a £7.25m pay cheque, in spite of sacrificing a £1m bonus. As if that weren’t egregious enough, he is entitled to further long-term bonus awards of £28m. If there was any justice, he would be handing every penny over to charities supporting education and health among the people whose heritage he allowed to be blown up.
It is a rare moment when three leading retail investment platforms – AJ Bell, Hargreaves Lansdown and Interactive Investor – find common cause.
At a time when London-based initial public offerings (IPOs) are in the ascendency, the exclusion of private investors from the offers, carved up among leading brokers and investment banks, is antithetical to the popular capitalism pioneered by the Tories.
One answer would be to require all companies announcing an IPO to adopt technology developed by London-based startup Primary Bid which would require all IPO sponsors to include a retail button that would guide them through the complexities of the float, leading to an instruction to purchase. Easy does it.