G4S (GFS) has agreed to sell the majority of its conventional cash services business to US security company Brink’s for an enterprise value of £727m. The deal does not include the group’s cash operations in the UK, South Africa and some other smaller markets, or its cash technology operations. Together, conventional cash handling and cash technology comprise G4S’s ‘cash solutions’ business.
The group announced back in December 2018 that it was reviewing options to separate its cash solutions arm from the rest of the group, seeing an opportunity to focus on providing security services and “unlock substantial shareholder value”. Options included a demerger – which involves distributing shares to existing shareholders – or an IPO. Having initiated plans for a demerger in the first half of 2020, G4S revealed it had also received unsolicited approaches from third parties to acquire the business unit. Management asserts that this part-disposal is “superior to a demerger”.
The deal will bring net cash proceeds of around £670m, of which 75 per cent will arrive in the first half of this year. The money will be invested in the core business and used to strengthen the balance sheet. Including almost £400m in lease liabilities, net debt ticked up 5 per cent to £2.1bn in the first half of 2019, equivalent to 2.85 times cash profits (Ebitda).
Bear in mind it spurned a £1.55bn offer for the entire cash solutions business from private equity group Charterhouse Capital Partners in 2013, saying the bid “fundamentally undervalues the business and its prospects”. Now, it has only managed to sell part of the division and Andrew Brooke, analyst at RBC Capital Markets, says the price is “slightly disappointing”, coming in around £100m lower than anticipated.
